Manufacturing activity in the U.S. expanded for the fourth straight month in September, according to a report released by the Institute for Supply Management on Thursday, although the pace of growth unexpectedly slowed modestly.
The ISM said its purchasing managers index edged down to 55.4 in September after rising to 56.0 in August. While a reading above 50 still indicates growth in the manufacturing sector, economists had expected the index to inch up to 56.3.
The unexpected dip by the headline index was partly due to a notably slower pace of growth in new orders, as the new orders index slumped to 60.2 in September after jumping to 67.6 in August.
The production index also fell to 62.0 in September after climbing to 63.3 in August, indicating a slowdown in the pace of growth.
The report said the employment index increased to 49.6 in September from 46.4 in August, although the reading below 50 still indicates a modest contraction in employment in the manufacturing sector.
“Rising production and new orders readings are encouraging, but contractionary employment suggests caution among manufacturers and supplier deliveries dislocations are persisting,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.
He added, “Looking ahead, we still expect manufacturing to continue gradually recovering, but weak demand, enduring supply chain disruptions, weaker energy activity and virus uncertainty will drag on activity, and risks remain heavily tilted to the downside.”
On the inflation front, the prices index climbed to 62.8 in September after jumping to 59.5 in August, indicating raw materials prices increased for the fourth consecutive month.
The ISM is scheduled to release a separate report next Monday on activity in the service sector in the month of September.
The association’s non-manufacturing index is expected to edge down to 56.0 in September after dipping to 56.9 in August.
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