US PMI Slips Again: What Seven Straight Months of Manufacturing Contraction Really Mean
A Sluggish September for U.S. Factories
The U.S. manufacturing sector stumbled once again in September, marking its seventh consecutive month of contraction, according to the latest ISM® Manufacturing PMI® report. The index came in at 49.1, a modest uptick from August’s 48.7, but still below the critical 50 threshold that signals expansion. While production showed signs of life, falling new orders and weak inventories cast doubt on any sustained rebound.
A PMI Reading That Tells Two Stories
At 49.1, the PMI suggests that manufacturing activity is shrinking — albeit at a slightly slower pace. This number offers a mixed picture: production rose to 51 percent, crossing into expansion territory, but new orders slumped to 48.9 percent, erasing much of that optimism. In essence, demand is softening even as factories push to maintain output.
New Orders Lose Momentum
The New Orders Index dropped sharply to 48.9 in September from 51.4 in August. That’s a key concern because new orders often drive future production. The dip suggests that the surge in demand seen in August may have been short-lived, leaving manufacturers grappling with slowing pipelines and weaker confidence from buyers.
Production Holds the Line
One bright spot in the report: the Production Index climbed to 51 percent, up from 47.8 in August. This signals that manufacturers are still working through backlogs and trying to sustain activity despite the slowdown in orders. However, ISM cautioned that the improvement may not last long if new demand continues to fade.
Employment Stuck in Neutral
The Employment Index also showed signs of improvement, rising to 45.3 from August’s 43.8. Still, that number is well below 50, meaning companies are largely holding headcount steady rather than hiring. According to ISM, 64% of manufacturers reported managing staff levels rather than expanding payrolls, highlighting continued caution in the sector.
Prices Still Rising, But at a Slower Pace
The Prices Index cooled slightly to 61.9 from 63.7, though it remains in expansion territory. Rising costs remain a thorn in the side of manufacturers, with raw materials and input prices still squeezing margins. This creates an ongoing challenge for both producers and consumers as inflationary pressures ripple through the supply chain.
Supplier Deliveries: Slowing Again
The Supplier Deliveries Index edged up to 52.6, signaling slower delivery times. While slower deliveries often point to stronger demand, in this case, ISM suggests it may reflect uneven supply conditions rather than booming order books.
Exports and Imports Drag Down Outlook
Global demand continues to weigh on U.S. factories. The New Export Orders Index fell to 43 percent, its lowest reading in months, while the Imports Index dropped to 44.7. Both declines underscore the fragility of global trade flows amid geopolitical tensions and shifting demand patterns overseas.
Winners and Losers by Industry
Out of the 16 manufacturing industries tracked, only five reported growth in September, led by Petroleum & Coal Products, Primary Metals, and Textile Mills. Meanwhile, 11 industries contracted, including Wood Products, Paper Products, Machinery, and Computer & Electronic Products. This uneven performance highlights the pressure facing key manufacturing hubs.
What It Means for the Bigger Economy
Despite the ongoing manufacturing slump, the overall U.S. economy remains in expansion mode for the 65th straight month. Still, ISM noted that 67% of the sector’s GDP contracted in September, with 28% of that contraction considered “strong,” a sharp jump from 4% in August. That surge in deeper contraction signals more widespread weakness within the sector.
Market Implications: Why Traders Should Care
For investors and traders, the September ISM PMI report reinforces a cautious outlook. Weak new orders and contracting employment raise red flags about near-term growth, even as production tries to keep pace. Currency markets, particularly the U.S. dollar, could see volatility as traders weigh the mixed signals between slowing demand and persistent inflationary pressures.
A Slow Crawl, Not a Rebound
The September ISM PMI reading may have edged higher, but the headline masks deeper weakness across demand, hiring, and global trade. Manufacturers are still stuck in a delicate balancing act: keeping output stable while wrestling with soft orders, rising costs, and global uncertainty. Until new demand stabilizes, the sector’s recovery will remain fragile at best.
At GME Academy, we track leading indicators like the ISM PMI to help traders and professionals understand where markets are heading. Manufacturing trends often set the tone for currencies, commodities, and equities — and knowing how to interpret them can give you the edge.
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