The ISM manufacturing index fell to a cycle low in September, as trade concerns and weak global growth further suppressed activity, explained Wells Fargo’s analysts.
“When the ISM manufacturing index sank last month into contraction territory for the first time since 2016, we wrote that it was the most undeniable evidence yet of the rising cost of the trade war and stress in manufacturing. The September ISM report takes that statement to a whole new level. The index fell a further 1.3 points in September. At 47.8, the ISM manufacturing index is now at its lowest level this cycle, including the 2015-2016 slowdown.”
“Every subcomponent in the survey is now below 50, with the one exception of supplier delivery times, which still grew more slowly. The production component sank further into negative territory, as did inventories, which is consistent with our expectations for slower stock building to be a drag on GDP growth this quarter.”
“With backlogs of orders shrinking for a fifth straight month, it is no surprise to see employers cutting back on hiring. New orders were little changed (up a tick to 47.3), but the fact that export orders fell to a fresh cycle low underscores that the headwinds from the global slowdown and strong dollar are not abating.”
“With no end in sight to trade uncertainty and the closely linked slowdown in global growth, we expect manufacturing to remain in the doldrums and for capex spending to serve as a drag on growth through the remainder of the year.”