WASHINGTON (MaceNews) – The Institute of Supply Management September reading of U.S. manufacturing showed overall momentum slowing though the index improved slightly to a still contractionary 49.1 and the report’s organizer warned that the weakening could be a leading indicator.
“The panelists are clearly saying that their customers are just not ordering,” said Susan Spence in a conference call with reporters. She is chair of the ISM survey committee. “To me, there’s a straight line from the uncertainty that remains to new orders being down.”
New orders slipped to being in the red after a bump up in August, a reading of 48.9 vs. 51.4.
The ISM report of manufacturing momentum – or lack thereof – is being even more closely watched by market participants amidst the sudden dearth of government statistics now that the government is mostly shut down. The includes Friday’s likely absence of the monthly jobs report from the Bureau of Labor Statistics. Only a quick reversal of political positions in the Senate – a seeming impossibility – could reschedule the jobs report.
Spence said the consensus seemed to be that the Federal Reserve’s quarter point rate cut a week ago is not helping much “because there’s such uncertainty and the tariffs that are in place.” Firms “feel very uncomfortable in the lack of new orders.”
Capitol investment plans are on hold, she said, and they “cannot be putting them on hold forever.”
Manufacturing tends to be first hit in an economic slowdown, a leading indicator of what’s in store for everything else, she said, even though the economy as a whole is still expanding.
Answering a question from Mace News, Spence said the uncertainty is not just about the future impact of tariffs but “panelists are telling us we aren’t certain” that existing tariff deals are “just not going to change again.” Decision making “just needs to settle down,” she said.
The government shutdown, she said, could be particularly impactful for those defense firms that need government auditors to continually approve output.
The ISM survey of purchasing managers suggests manufacturing has been in contraction for seven straight months with employment down for eight months.
Most striking was the September plunge in export orders, dropping 4.6 percentage points to 43.0, a direct effect of the tariff environment.
Production ticked up to an expansionary 51.0 from 47.8 but that surge was dismissed by Spence as temporary, just the August increase in new orders moving through the pipeline.
Prices slowed their rate of increase, posting a 61.9 compared to August’s 63.7.
Respondent comments reflected concern with the tariff’s effect on supply chains, with one saying, “Steel tariffs are killing us.” The sectoral U.S. tariffs on imported steel and aluminum were imposed separately from the so-called reciprocal tariffs which apply to different degrees country by country.
Sal Guatieri, senior economist for BMO Capital Markets, summed it up, labeling his analysis, “U.S. Manufacturers Not Feeling Tariff-ic.”