ISM Shows Slower Growth in Manufacturing in September

factoryWith Friday's key unemployment and payrolls report coming up, investors are looking for any glimmer of what to expect in directional movement. Wednesday already brought the ADP payrolls surprise higher and a slight drop in TrimTabs, both measuring payrolls. Now we have the Institute for Supply Management (ISM) reporting its Purchasing Managers Index (PMI) at 56.6%.

What investors will care about from the ISM reading is that this was a decrease of 2.4 percentage points from August's reading of 59.0%. It was also handily under the 58.0% consensus estimate from Bloomberg.

The summary of the report showed new orders, employment, production and inventories growing. Supplier deliveries were indicated as slowing. All in all, this marked the 16th consecutive month of growth for the U.S. manufacturing sector — and the overall economy grew for the 64th consecutive month.

Other key data were as follows:

  • New Orders Index registered 60.0%, a decrease of 6.7 percentage points from the 66.7% reading in August (growth in new orders for the 16th consecutive month).
  • Production Index rose 0.1% to 64.6%.
  • Employment Index was 54.6%, a decrease from the August reading of 58.1%.
  • Inventories of raw materials registered 51.5%, a decrease of 0.5 percentage point from the August reading of 52.0%.
  • Comments from the panel reflected a generally positive business outlook, while noting some labor shortages and continuing concern over geopolitical unrest. Of the 18 manufacturing industries, 15 reported growth in September.

The report's reading on labor would be a concern, except for one small detail — this is a manufacturing report. America's economy is viewed as being largely a post-manufacturing economy, even if the U.S. manufacturing sector remains strong compared to most of the world.

S&P 500 futures were down 14 points at 1,958 and the DJIA was down 146 points at 16,896.

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