Please consider the Manufacturing ISM® Report On Business® for October 2022.
Manufacturing PMI® Details
- “The October Manufacturing PMI® registered 50.2 percent, 0.7 percentage point lower than the 50.9 percent recorded in September. This figure indicates expansion in the overall economy for the 29th month in a row after contraction in April and May 2020.
- The Manufacturing PMI® figure is the lowest since May 2020, when it registered 43.5 percent.
- The New Orders Index remained in contraction territory at 49.2 percent, 2.1 percentage points higher than the 47.1 percent recorded in September.
- The Production Index reading of 52.3 percent is a 1.7-percentage point increase compared to September’s figure of 50.6 percent.
- The Prices Index registered 46.6 percent, down 5.1 percentage points compared to the September figure of 51.7 percent. This is the index’s lowest reading since May 2020 (40.8 percent).
- The Backlog of Orders Index registered 45.3 percent, 5.6 percentage points lower than the September reading of 50.9 percent.
- After one month of contraction, the Employment Index was unchanged at 50 percent, 1.3 percentage points higher than the 48.7 percent recorded in September.
- The Supplier Deliveries Index reading of 46.8 percent is 5.6 percentage points lower than the September figure of 52.4 percent. This reading, the index’s lowest since March 2009 (43.2 percent), ended a streak of 79 months in ‘slowing’ territory.
- The Inventories Index registered 52.5 percent, 3 percentage points lower than the September reading of 55.5 percent.
- The New Export Orders Index reading of 46.5 percent is down 1.3 percentage points compared to September’s figure of 47.8 percent. This is the index’s lowest figure since May 2020, when it registered 39.5 percent.
- The Imports Index remained in expansion territory at 50.8 percent, 1.8 percentage points below the September reading of 52.6 percent.”
What Respondents Say (Emphasis Mine)
- “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]
Diffusion Index
ISM is a diffusion index. Direction matters, the amount doesn’t.
For example, one company hiring a single worker will offset another company laying off 1,000 workers.
Mish’s Take
Across the board ISM® posted its weakest readings since the depths of the pandemic.
New export orders are in their third month of contraction. Prices plunged 5.1 percentage points into substantial contraction.
Importantly, the backlog of work vanished. Manufacturers will no longer be able to smooth out declining orders by working on backlogs.
The rise in employment is a mirage. On average, companies are not hiring in these conditions.
The 3-Month T-Bill Yield Inverts With the 30-Year Long Bond
Earlier today I noted The 3-Month T-Bill Yield Inverts With the 30-Year Long Bond
This is the strongest recession signal yet, but the Fed is likely happy about it.
The Fed is cheering other data as well.
This post originated at MishTalk.Com.
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