PMI down, but manufacturing sector still growing

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Economic activity in the manufacturing sector expanded in September for the 14th consecutive month, and the overall economy grew for the 17th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business released Friday, Oct. 1. Manufacturing continued to grow in September, but at a slower rate as the PMI registered 54.4 percent, a decrease of 1.9 percentage points when compared to August’s reading of 56.3 percent.

A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. “While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging,” says Norbert Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.

The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent in January. “Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter,” Ore says. “Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector.”