WASHINGTON: US manufacturing activity contracted in October by more than analysts had expected as new orders fell sharply, survey data showed Wednesday.
The Institute for Supply Management’s (ISM) manufacturing index came in worse than expected at 46.7 percent last month, down from 49.0 percent in September.
This was well below the median expectation of economists surveyed by MarketWatch, and suggests that manufacturing activity remains firmly below the 50 percent threshold indicating growth in the sector.
It was the 12th straight month of contraction, and the lowest monthly figure since July of this year. “The US manufacturing sector continued to contract and at a faster rate in October,” ISM survey chief Timothy Fiore said in a statement.
He added that companies were “still managing outputs appropriately as order softness continues,” adding that the new orders index was now contracting at a faster rate.
Of the five subindexes that directly factor into the manufacturing index, only the production index was expanding, he said.
“Higher rates are putting the brakes on the recovery in manufacturing,” Pantheon Macroeconomics Senior US Economist Kieran Clancy said in a statement. The US Federal Reserve has raised interest rates to a 22-year high to tackle high inflation, and is likely to prolong its pause in hikes later Wednesday as it continues its fight against rising prices.
Clancy said a renewed sharp downturn in the sector was unlikely, “given that most of the hit from the Fed’s rate hikes have already worked through.”
He added that recent Chinese manufacturing data indicates the US may also benefit from a modest boost from external demand.
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