Manufacturing activity in the U.S. continued to contract in the month of October but at a slightly slower pace, according to a report released by the Institute for Supply Management on Friday.
The ISM said its purchasing managers index crept up 48.3 in October from 47.8 in September, although a reading below 50 still indicates a contraction in manufacturing activity. Economists had expected the index to rise to 48.9.
In the previous month, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession.
“Comments from the panel reflect an improvement from the prior month, but sentiment remains more cautious than optimistic,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee. “Global trade remains the most significant cross-industry issue.”
The uptick by the headline index came as the new orders index climbed to 49.1 in October from 47.3 in September but still indicates a contraction.
The employment index also rose to 47.7 in October from 46.3 in September, indicating employment in the manufacturing sector contracted at a slower rate.
The Labor Department’s monthly jobs report said the manufacturing sector lost 36,000 jobs in October, partly reflecting the strike at General Motors (GM).
Meanwhile, the ISM said the production index dropped to 46.2 in October from 47.3 in September, pointing to a faster rate of contraction.
The prices index also tumbled to 45.5 in October from 49.7 in September, indicating raw materials prices decreased for the fifth consecutive month.
“With most of the regional manufacturing surveys stabilizing and the alternative national Markit PMI seeing a rebound over the past couple of months, there are tentative signs that the manufacturing sector could be turning a corner, particularly when some of the global manufacturing surveys have also improved,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
He added, “With a sustained rebound in global growth still looking unlikely, and the very real prospect that trade negotiations with China once again break down, however, we still expect manufacturing conditions to remain unusually weak over the coming months.”
Next Tuesday, the ISM is scheduled to release a separate report on activity in the service sector in the month of October.
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