U.S. ISM manufacturing index falls in October

The U.S. ISM manufacturing index fell in the month of October, dropping 2.1 percentage points to 57.7. Expectations were for a more modest fall of 0.8 percentage points to 59. Even if this is the second straight fall in the headline index, the overall activity continues to be in line with an ongoing sound growth in the U.S. manufacturing sector.

Except supplier deliveries, the main subcomponents of the index dropped in the month, but continue to stay at sound levels. New orders dropped to 57.4, while production dropped 4 points to 59.9. Employment dropped slightly to 56.8.

The trade components of the report were disappointing. New export orders dropped to 52.2, while imports dropped to 54.3. These levels continue to be below those recorded at the time the U.S. administration levied tariffs on steel and aluminium imports this past March.

Out of 18 manufacturing industries, 13 recorded growth in October. Four industries saw contraction: primary metals, wood products, nonnmetallic mineral products, and fabricated metal products.

The manufacturing sector in the U.S. continues to grow at a healthy rate, although momentum seems to be fading. American manufacturers are facing several headwinds that are acting to hold back a further growth in activity, and the USMCA does not seem to be offering much relief, noted TD Economics in a research report.

“As global growth continues to slow from its peak in the first half of this year, a potential escalation in trade tensions between the U.S. and China could result in an even greater slowdown in demand than anticipated, and may result in further bouts of financial market volatility”, added TD Economics.

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