After surging to a multi-year high in August, the ISM Manufacturing index pulled back slightly more than expected in September, falling from 61.3 down to 59.8 versus expectations for a drop to 60.0.  As shown in the chart, though, activity is still at extremely robust levels.

In terms of the commentary of this month’s report, it was generally positive, but that strength is being clouded by the issue of tariffs, which is showing up in a number of sectors like Computer and Electronic Products, Chemicals, Furniture, and Plastics.

As far as the breakdown of this month’s report is concerned, breadth was relatively weak.  On a m/m basis, just four categories improved while six declined.  Production was one bright spot, as were Export and Import Orders, which is a bit surprising given the recent barriers to trade. The only other category to show a m/m increase was Employment.  On the downside, the most notable decline was Prices Paid.  That index dropped from 72.1 down to 66.9 which is the lowest monthly reading of the year and largest m/m decline since last June.  Here again, one would expect the increasingly tense trade environment to be having upward rather than downward pressure on prices.

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