U.S. Manufacturing Activity Declines to 15-Month Low

WASHINGTON (Reuters) – U.S. manufacturing activity slumped to a 15-month low in October, facing rising input prices.

The Institute for Supply Management (ISM) reported on Friday that its manufacturing PMI fell to 46.5 in October, down from 47.2 in September, marking the lowest level since July 2023. A PMI reading below 50 indicates contraction in the manufacturing sector, which constitutes 10.3% of the economy.

This PMI decline may be influenced by a strike by factory workers at planemaker Boeing (NYSE:BA), which has stalled production of its best-selling 737 MAX and the 767 and 777 wide-body programs. This labor unrest has contributed to a drop in industrial production in September.

October marked the seventh consecutive month the PMI has been below the 50 threshold but remained above the 42.5 level generally indicative of overall economic expansion. Despite this, the survey has highlighted certain weaknesses in manufacturing, while goods spending rose at its fastest pace in 1-1/2 years during the third quarter.

Goods spending has remained resilient despite increasing borrowing costs and could potentially rise further with the Federal Reserve beginning to reduce interest rates.

The ISM survey's forward-looking new orders sub-index increased to 47.1 in October from 46.1 in September. However, output contracted further, likely due to the impact of the Boeing strike, affecting suppliers. The production index dropped to 46.2 from 49.8 in September.

The measure of prices paid by manufacturers surged to 54.8, up from 48.3 in September, which had been the lowest level since December 2023. The gauge of supplier deliveries fell to 52.0 from 52.2 in the prior month, indicating slower deliveries.

Factory employment showed slight improvement but remained at low levels, with the manufacturing employment measure rising to 44.4 from 43.9 in September.