Published: Thu, October 03, 2019
Money | By Ethel Goodwin

ISM manufacturing index drops to lowest level in a decade

ISM manufacturing index drops to lowest level in a decade

USA factory activity dropped to its lowest level in over a decade last month amid heightened trade conflicts and fears of a global slowdown in economic growth.

The Institute for Supply Management's newest report shows the Purchasing Managers' Index sank to 47.8% in September, which was its second straight month of contraction, and the lowest the index has been since June 2009.

The New Orders Index registered 47.3%, an increase of 0.1 percentage point from the August reading of 47.2%. Readings below 50 indicate activity is contracting across the manufacturing sector, while those above 50 signal expansion.

The overall gauge will probably continue to be subdued unless there's a pickup in new orders, Timothy Fiore, chair of ISM's manufacturing survey committee, told reporters on a call.

The ISM said comments from manufacturers "reflect a continuing decrease in business confidence", and also noted that "global trade remains the most significant issue".

The almost 15-month trade spat between the United States and China has hit American manufacturers especially hard, as business confidence weakens and global demand softens.

We now expect 25bp rate-cut at each of the remainder three FOMC meetings for 2019 bringing the Fed Funds Target Rate to a range of 1.25%- 1.50%.

Economists polled by Reuters had forecast the ISM index rising to 50.1 in September.

EUR/USD: The euro gained against the USA dollar on Tuesday, as dollar pared gains following the US manufacturing data.

Concerns are rising that the contraction in manufacturing could spill over into the rest of the US economy.

"We have now tariffed our way into a manufacturing recession in the USA and globally", Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC.

The headline index has now remained below the neutral 50.0 mark for five successive months, its longest sequence below that mark since mid-2009.

The ISM explanations showed that demand and new orders contracted, while inventories were more or less in the right area.

Making matters worse, the contraction in September was steeper than it was in August, when the sector contracted for the first time in three years because of higher prices that factories pay for materials and weaker global demand. -China trade war is hurting the economy.

"UK manufacturers are also losing customers and production continued to contract in September as companies cut back output in response to further reductions in new orders received".

One respondent from the electrical equipment sector summed it up: "Economy seems to be softening".

Like this: