Economic Warnings from Purchasing Managers

By SBE Council at 5 October, 2022, 1:23 pm

by Raymond J. Keating – 

The latest surveys of purchasing managers from the Institute for Supply Management (ISM) offered additional warning signals regarding the U.S. economy.

On Monday, October 3, the ISM Manufacturing PMI for September was released and it came in at 50.9 percent. While that remained in the growth range (anything above 50 percent points to growth in manufacturing), it was down by 1.9 percentage points versus August, and came in at the lowest level since May 2020.

Timothy R. Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, noted:

“The U.S. manufacturing sector continues to expand, but at the lowest rate since the pandemic recovery began. Following four straight months of panelists’ companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand.”

He also noted:

“The New Orders Index returned to contraction territory at 47.1 percent, 4.2 percentage points lower than the 51.3 percent recorded in August. The Production Index reading of 50.6 percent is a 0.2-percentage point increase compared to August’s figure of 50.4 percent.”

Of the 16 manufacturing sectors tracked, nine expanded in September, while seven contracted.

Meanwhile, the ISM Service PMI, released on October 5, showed continued growth in services in  September, registering 56.7 percent. That was down by 0.2 percentage points compared to August. Also, 15 service industries expanded in September, while three declined.

Anthony Nieves, chair of the Institute for Supply Management Services Business Survey Committee, pointed out, “The Business Activity Index registered 59.1 percent, a decrease of 1.8 percentage points compared to the reading of 60.9 percent in August. The New Orders Index figure of 60.6 percent is 1.2 percentage points lower than the August reading of 61.8 percent.”

Also, price issues continued to ease some for both manufacturing and services.

In the end, the direction on both of these indexes is troubling, especially regarding manufacturing. Unfortunately, very little is happening on the policy front that would give a boost to economic growth. To the contrary, the White House, Congress and the Fed are in agreement in that each continues to push anti-growth policies.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.