The United States manufacturing sector expanded for a tenth consecutive month in October, and at a faster pace, according to the survey the Institute for Supply Management (ISM) released on November 2. The Manufacturing PMI came in at 55.5 percent, a full percentage point above September's 54.5 percent. Any reading above 50 percent indicates expansion.
The detail that matters most to the Federal Reserve sits further down the report. The prices index, which tracks what factories pay for raw materials and components, registered 75.2 percent. That is 2.7 points below September's 77.9 percent — but it is the 25th month in a row in which purchasing managers reported paying more than they had the month before.
Production at a four-year high
Production was the strongest component of the survey at 59.0 percent, up 2.3 points on the month and the highest reading since November 2021, when the index stood at 60.5 percent. New orders edged up to 55.5 percent from 55.3 percent.
Employment told a different story, slipping 0.3 points to 52.4 percent — still expansion, but the weakest of the main sub-indexes. Inventories returned to growth at 51.4 percent after 48.6 percent in September, a 2.8-point jump. Supplier deliveries, an index on which a higher number means slower deliveries, registered 59.1 percent, an 11th straight month of deterioration. The backlog of orders fell 1.8 points to 54.6 percent.
Twelve manufacturing industries reported growth in October. Three contracted: printing and related support activities, paper products, and nonmetallic mineral products.
Expansion without confidence
Susan Spence, who chairs the ISM Manufacturing Business Survey Committee, noted that "the overall economy expanded for the 24th month in a row."
The sentiment behind the numbers was less comfortable. General sentiment worsened for a third consecutive month, with 34 percent of the comments purchasing managers submitted positive and 66 percent negative.
That gap — strong output, unhappy managers — is the shape of a sector growing into rising costs rather than falling ones. Orders and production are being filled; the bill for filling them keeps climbing.
What the Fed does with it
The Federal Open Market Committee held its target range for the federal funds rate at 3.75 to 4 percent on October 28, in a 10-2 vote. Both dissenters — governor Lisa D. Cook and Cleveland Fed president Beth M. Hammack — wanted a quarter-point increase. The committee's statement described economic activity as expanding strongly and said inflation "remains elevated."
A prices index above 75 percent for a second straight month does nothing to settle that argument. The committee next meets on December 9, and the October employment report, due November 6, is the larger remaining input before it does.
Reporting from the Institute for Supply Management and the Federal Reserve.
