US MANUFACTURING neared stagnation in October as orders contracted for the fourth time in five months, while an index of prices paid fell to a more than two-year low.
The Institute for Supply Management's gauge of factory activity retreated 0.7 point to 50.2, the lowest since May 2020, according to data released on Tuesday (Nov 1). The median projection in a Bloomberg survey of economists called for a drop to 50, the reading that separates expansion and contraction.
The overall manufacturing index has fallen in four of the last five months, and several of the report's demand metrics showed outright contraction in October. New bookings shrank, a measure of backlogs hit the lowest since mid-2020 and export orders contracted for a third month.
"The October index reading reflects companies' preparing for potential future lower demand," Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee, said in a statement.
The report adds to evidence of growing global recession concerns as central banks, including the Federal Reserve (Fed), step up the fight to get inflation under control. Fed policy makers are projected to increase their benchmark rate by another 75 basis points on Wednesday.
Ten manufacturing industries reported a contraction in October, led by furniture, wood products, paper products and textiles. Eight industries expanded, including apparel and machinery and transportation equipment.
In recent months, manufacturers have seen a decline in the prices for oil, metals and other commodities used for production. The group's measure of prices paid for raw materials fell in October for a seventh-straight month to the lowest level since May 2020, the last time costs contracted.
The ISM data are consistent with the weakness seen across recent regional Fed bank manufacturing surveys. An index of New York state factory activity contracted for a third straight month in October. Manufacturing also shrank in Texas and in areas covered by the Fed banks of Kansas City and Richmond.
The ISM's employment gauge edged up to the breakeven reading of 50 after shrinking in September, suggesting manufacturers are either limiting hiring, having trouble finding skilled labour or a combination of the two.
Meanwhile, softer demand has allowed manufacturers to clear some of their backlogs and improve delivery times. The ISM's supplier deliveries index fell to 46.8, the lowest reading since March 2009 and indicating faster delivery times.
Inventories continued to grow in October, but at the slowest pace since April. BLOOMBERG