(Reuters) – U.S. manufacturing activity remained in contraction territory for the 11th consecutive month in September, but rebounded more strongly than expected, suggesting it could recover soon.
According to the monthly survey of the Institute for Supply Management (ISM), the manufacturing index stood at 49.0 last month compared to 47.6 the previous month.
Economists polled by Reuters on average expected a reading of 47.8.
The index, which in June reached its lowest since May 2020 at 46.0, is stuck below the bar of 50 which separates contraction from growth in activity since last November. This is the longest period since the 2007-2009 financial crisis.
Leading indicators show a manufacturing sector in decline, but “hard” data suggests that the sector, which accounts for 11.1% of the US economy, is holding up in a context of higher rates.
Orders for manufactured goods rose 4.2% year-on-year in August and business equipment spending appears to have remained strong in the third quarter after rebounding between April and June.
The new orders subindex rose from 46.8 in August to 49.2 last month. Improving new orders led to an acceleration in production at factories, with the production index increasing to 52.5 from 50.0 the previous month.
Although backorders have declined, inventories at factories and their customers have remained very low, which should support future production. As demand remains weak, input prices have remained moderate.
The index of prices paid by manufacturers, as measured by the survey, fell to 43.8 from 48.4 in August. This bodes well for inflation dynamics, but the auto workers’ strike could push up motor vehicle prices.
Factory employment improved further after falling to a three-year low in July. The factory employment indicator rose to 51.2 last month from 48.5 in August.
(Written by Lucia Mutikani, French version Corentin Chappron, edited by)
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