Thursday’s ISM Manufacturing report for the month of September showed that conditions in the US Manufacturing sector continue to deteriorate driven by weakness in the Energy sector and a stronger dollar hurting exports. While economists were expecting the headline reading to come in at a level of 50.6, the actual reading came in at 50.2, just barely hanging on to the 50 level which is the boundary between growth and contraction. As shown in the chart below, this month’s headline reading was the lowest since May 2013. This comment from one respondent in the Chemicals sector pretty much sums up everything right now: “North American business steady. International business trending bearish.”
Looking at the internals of this month’s report showed little in the way of bright spots. The only category which increased this month was Customer Inventories, which suggests that ‘product’ isn’t exactly flying off the shelves. This month’s increase in that category puts it at its highest level since January 2009. On the downside, the biggest decline came in Backlog Orders and Production. On a year/year basis, every category besides Customer Inventories also declined with Prices Paid and Production seeing the largest declines. Based on where the indices for each category currently stand, New Orders is at its lowest level since November 2012 and Export Orders are at their lowest level since April 2009. The decline in Export Orders once again illustrates how the strong dollar and weak global economies are hurting demand for US exports. For a broader look at US economic data and how it currently stands, check out our Bespoke Matrix of Economic Indicators (available to all Bespoke Premium and Institutional clients) as well as the Bespoke Consumer Pulse Survey from Bespoke Market Intelligence that will be sent out to clients of that service on Friday.