You are here

US factory gains cooled to still-solid pace in September

[WASHINGTON] A measure of US manufacturing cooled in September from a 14-year high as supply bottlenecks and price pressures eased, Institute for Supply Management data showed Monday.

Key Takeaways

The ISM report indicates manufacturing is coming off the boil while still expanding at a solid pace amid steady demand and lower taxes, indicating the industry is poised to contribute to economic growth in the second half. Tariff wars with China remain a cloud over the outlook - with the ISM again citing respondents as "overwhelmingly concerned" about the levies - though an updated trade accord with Canada and Mexico may provide some relief.

Declines in gauges of backlogs and supplier-delivery times signal factories are catching up with demand, helping to dissipate price pressures. In prior months, producers' rush to buy materials ahead of US tariffs and counter-levies by China triggered supply-chain disruptions and a surge in costs.

sentifi.com

Market voices on:

The ISM index of employment bodes well for manufacturing payrolls, which are projected to rebound in September after a small drop in August. The data will be part of the US jobs report due on Friday from the Labor Department.

Fifteen of 18 industries reported growth, including machinery; chemical products; transportation equipment; furniture; textile mills; plastics and rubber products; and computer and electronics, ISM said in a statement. The only industry reporting a contraction was primary metals.

Official's Views

Companies overall say the environment is good for business, though have expressed "less optimism" that they will be able to pass on higher materials prices to customers, Timothy Fiore, chairman of the ISM manufacturing survey, said on a conference call Monday.

While the new US-Mexico-Canada agreement "provides clarity, and clarity is good for the business community," Mr Fiore added that there's still uncertainty about tariffs on imported metals.

Other Details

Gauge of supplier deliveries fell to a five-month low of 61.1 from a 64.5 reading that was near a 14-year high; shows lead times growing at slower pace as producers find it easier to meet demand

Index of backlogs fell to 55.7 from 57.5; inventories slid to 53.3 from 55.4

Export orders measure rebounded to 56, the first pickup in three months, from 55.2

BLOOMBERG