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ISM Manufacturing: Barely Hanging On

November 1, 2022
Bottom Line: ISM's survey-based index of manufacturing managers held just above 50, the dividing line between growth and contraction. Production growth remained positive, accelerating just a touch, while new orders contracted at a slower pace in October. Overall, the report confirmed a marked slowdown in manufacturing. But on the plus side, anecdotes suggested supply chain congestion easing even further. Moreover, prices paid were sharply lower, falling for the first time since the pandemic.

The ISM Manufacturing Index
FELL 0.7 points to 50.2, BELOW the 3-Month average of 51.3, BELOW the 6-Month average of 52.63, and 10.6 BELOW the year-ago level.
New orders ROSE 2.1 points to 49.2, BELOW the 3-Month average of 49.2, BELOW the 6-Month average of 49.98, and 11.4 BELOW the year-ago level.
  • Production ROSE 1.7 points to 52.3, ABOVE the 3-Month average of 51.1, BELOW the 6-Month average of 52.65 but 6.7 BELOW the year-ago level.  
  • Employment ROSE 1.3 points to 50, BELOW the 3-Month average of 50.97, ABOVE the 6-Month average of 49.95, and 2.1 BELOW the year-ago level.  
  • Inventories FELL 3 points to 52.5, BELOW the 3-Month average of 53.7, BELOW the 6-Month average of 55.05 and 3.9 BELOW the year-ago level. 
  • Prices paid FELL 5.1 points to 46.6, BELOW the 3-Month average of 50.27, BELOW the 6-Month average of 61.92 and 39.1 BELOW the year-ago level.  
  • Backlog orders FELL 5.6 points to 45.3, BELOW the 3-Month average of 49.73, BELOW the 6-Month average of 52.07 and 18.3 BELOW the year-ago level.
  • “Flat business activity; continued electronics market challenges.” [Computer & Electronic Products]
  • “Customers are canceling some orders. Inventories of finished goods increasing. Expect some bounce back as some customers may be waiting for commodity prices to decline (further).” [Chemical Products]
  • “Challenges with labor and parts delivery are easing. Order levels are slowing down after pent-up demand in the previous month.” [Transportation Equipment]
  • “Growing threat of recession is making many customers slow orders substantially. Additionally, global uncertainty about the Russia-Ukraine (war) is influencing global commodity markets.” [Food, Beverage & Tobacco Products]
  • “We have seen a general pullback in available capital budgets from our customers, and that is having a significant impact on our sales in the fourth quarter.” [Machinery]
  • “Housing market is down, so our business is affected. Capacity has increased over the last two years due to high orders of consumer goods and appliances, so now we’re trying promotions to get our orders up to where we can use all our capacity.” [Electrical Equipment, Appliances & Components]
  • “Customer demand has been slower for two months. Production is decreasing our inventory and (we are) implementing forecasts carefully. The headwind seems to be very strong, so we need to be prepared for that.” [Fabricated Metal Products]
  • “International conditions loom large and seem very foreboding. Overall, we still think 2023 will be a positive year, with at least some moderate growth.” [Nonmetallic Mineral Products]
  • “Lead times are improving. Plastic prices are coming down.” [Plastics & Rubber Products]
  • “Prices are continuing a slight decline. Suppliers are trying to hold off decreases, but competition is increasing.” [Miscellaneous Manufacturing]
Article by Contingent Macro