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US manufacturing industry eases in September: ISM

H.S. Borji
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US manufacturing industry eases in September: ISM

The US manufacturing industry accelerated at a slower pace in September, but overall output remained strong as production levels continued to increase.

The Institute for Supply Management’s gauge of US manufacturing activity declined to 56.6 from 59. A median estimate of economists called for a slight decrease to 58.5 The US manufacturing industry has been above the 50 mark that separates expansion from contraction for sixteen consecutive months.

A reading above 50 is a general sign of growth in manufacturing activity, whereas a reading below that level signifies contraction.

Manufacturing output eased from the previous month’s more than three year high, although gains remained broad-based throughout the industry. Fifteen of 18 manufacturing industries advanced in September, led by wood products, primary metals, and apparel, leather and allied products. The three industries to report contraction in September were machinery, plastics and rubber products, and electrical equipment, appliances and components.

Growth in new orders moderated in September, as 12 of 18 industries reported growth. The new orders sub-index fell 6.7 percentage points to 60, ISM data showed.

Production levels remained elevated, increasingly slightly over the previous month as 15 industries reported gains. The production index edged up 0.1 percentage point to 64.6.

Higher production levels resulted in another month of job creation, albeit at a slower rate than the previous month. Eleven of the 18 manufacturing industries said they increased payrolls last month, led by apparel, leather and allied products, primary metals, and wood products. Five industries reported a decrease in employment. The employment sub-index decreased 3.5 percentage points to 54.6.

“Demand is pretty good overall. Freight continues to be a major issue,” said one purchasing manager from the chemical products industry.

“Outlook is very good. Demand seems to be increasing,” said another from the paper products industry.

“Things are a bit slower than the first half,” expressed another representative from the printing and related support activities industry.

A separate gauge of manufacturing output released today reflected a similar decline in overall activity. Markit Group’s manufacturing PMI eased slightly in September to 57.5 from 57.9.

Last month the Commerce Department said durable goods orders declined 18.2 percent in August, easing off the previous month’s record high, as demand for transportation equipment eased. Excluding the volatile transportation category, durable goods orders were up 0.7 percent.

Durable goods orders had surged 22.5 percent in July, led by a huge spike in civilian aircraft.

Today’s figures promote the view the US economy is reaching higher ground in the second half of the year, and is building off a strong second quarter that saw gross domestic product expand at an annual rate of 4.6 percent. According to economists, the US economy is on pace to grow more than 3 percent in the third quarter.

Growth in all of 2014 is expected to average 2 percent to 2.2 percent, according to the Federal Reserve. The subdued growth outlook is due mainly to a disappointing first quarter, when the economy contracted 2.1 percent from year-ago levels.

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