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ISM: Manufacturing sector slowing

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ISM:  Manufacturing sector slowing

October PMI comes in at 50.1%.

According to a closely-watched index of manufacturing activity, manufacturing in the United States appears to be slowing.  However, there remains “cautious optimism” about the future.

The Institute for Supply Management reported yesterday that its manufacturing PMI for October registered at 50.1%, a decrease of 0.1 percentage point from September.  This is the lowest level since May of 2013.  A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

If the PMI for October (50.1%) is annualized, it corresponds to a 2.2% increase in real GDP annually."

Bradley J. Holcomb, chair of the ISM’s Manufacturing Business Survey Committee, stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through October (52%) corresponds to a 2.8% increase in real GDP on an annualized basis. In addition, if the PMI for October (50.1%) is annualized, it corresponds to a 2.2% increase in real GDP annually."

On a more positive note, the ISM's New Orders Index registered 52.9% in October, an increase of 2.8 percentage points when compared to September, indicating growth in new orders for the 35th consecutive month, and at a faster rate relative to September. The Production index also rose, coming in at 52.9%, compared to 51.8% on September.

Job creation disappointed, as the Employment Index fell 2.9 percentage points to 47.6% in October – the lowest since August 2009.

Holcomb noted that “comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries."

 

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