US Manufacturing Slows Pace of Contraction in September

The index that tracks activity in the U.S. manufacturing industry showed a contraction for the 11th-consecutive month. However, the pace of contraction was the slowest in almost a year as companies prepare for traditionally higher consumer demand in the fourth quarter.

The manufacturing Purchasing Managers' Index (PMI) rose to 49 in September from 47.6 in August, the Institute for Supply Management's said in a statement this week.

A reading below 50 indicates a contraction. The PMI has been under that level since November, the longest period of contraction since the 2007-2009 recession.

The index that tracks new orders rose encouragingly to 49.2 in September from 46.8 in August. The production index also showed an expansion with a reading of 52.5 from 50 in the previous month.

Companies are still managing outputs carefully as order softness continues, but the month-over-month PMI improvement in September is a clear positive as the economy heads into the end of year festive period when there is a heightened demand for many goods.

Despite the Fed’s record monetary tightening cycle, inflation has been stubbornly high, leading to weaker consumer demand in the U.S. The fourth quarter always brings a surge in activity, and companies across the manufacturing spectrum will be preparing for a final revenue boost before the end of the fiscal year.