ISM Contracts for 8th Consecutive Month

Economic activity in the manufacturing sector contracted in October for the eighth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation's supply executives in the latest ISM Manufacturing PMI Report issued on November 3.

The Manufacturing PMI registered 48.7% in October, a 0.4-percentage point decrease compared to the reading of 49.1%recorded in September.

The overall economy continued in expansion for the 66th month after one month of contraction in April 2020. 

Index readings are as follows:

Supplier Index measured 54.2%, up 1.6 percentage points from the 52.6% recorded in September.

New Orders Index contracted for the second month in October, following one month of growth; the figure of 49.4% is 0.5 percentage point higher than the 48.9% recorded in September.

New Export Orders reading of 44.5% is 1.5 percentage points higher than the reading of 43% registered in September. 

Imports Index registered 45.4%, 0.7 percentage point higher than September's reading of 44.7%.

Production Index registered 48.2%, which is 2.8 percentage points lower than September's figure of 51%. 

Prices Index registered 58%, down 3.9 percentage points compared to the reading of 61.9% reported in September.

Backlog of Orders Index registered 47.9%, up 1.7 percentage points compared to the 46.2% recorded in September.

Employment Index registered 46%, up 0.7 percentage point from September's figure of 45.3%.

Matthew Martin, senior US economist at Oxford Economics, offered the following analysis of the report: 

• The ISM manufacturing index surprised to the downside in October, as reduced demand from customers led to weaker production and reduced employment. Higher prices and general uncertainty surrounding trade policy remain the two consistently cited grievances from manufacturers.
• Firms are concentrated on managing headcount and reducing overhead costs, with a noticeable shift towards the use of layoffs in addition to attrition. Manufacturing payroll employment will likely show further declines when data is eventually released.
• Until the full effect of tariffs filters through supply chains and trade policy uncertainty wanes, the sector is likely to be mired in recession. However, we look for lower interest rates and a fiscal boost from the One Big Beautiful Bill to provide a boost to the sector next year.

"Looking at the manufacturing economy, 58% of the sector's gross domestic product (GDP) contracted in October, down from 67% in September; however, the percent of GDP in strong contraction is at 41%, up 13% from September," said Susan Spence, chair of the Institute for Supply Management Manufacturing Business Survey Committee. in a statement.

Of the six largest manufacturing industries, only two (Food, Beverage & Tobacco Products; and Transportation Equipment) expanded in October.

What Respondents are Saying

• "Business continues to remain difficult, as customers are canceling and reducing orders due to uncertainty in the global economic environment and regarding the ever-changing tariff landscape." (Chemical Products)
• "Decrease in domestic demand for finished products has resulted in slower manufacturing and an increase of raw material in inventory." (Petroleum & Coal Products)
• "In general, business is really strained. Money is sitting tighter, and geopolitical changes add to the uncertainty/risk factor. Even medical fields are feeling the pressure." (Miscellaneous Manufacturing)
• "Sales continue to underperform in our automotive OEM and industrial divisions. Our aerospace and automotive aftermarket are the only areas performing slightly above 
• budget. This is the third month of lower-than-expected sales, and the remainder of the year outlook is not looking better. Sales are expected to be slightly less than in 2024." (Fabricated Metal Products)
• "Tariffs continue to be a large impact to our business. The products we import are not readily manufactured in the U.S., so attempts to reshore have been unsuccessful. Overall, prices on all products have gone up, some significantly. We are trying to keep up with the wild fluctuations and pass along what costs we can to our customers." (Machinery)
• "The commercial vehicle (CV) market remains depressed as customers continue to delay vehicle purchases. Uncertainty in price and transportation demand remains the center of attention. U.S. trade policy and reciprocal actions by China in the form of export controls on rare earths and semiconductors, as well as ocean freight carrier restrictions, have once again caused a lot of stress in supply lines. The CV industry is now bracing for the next round of tariffs focused on commercial vehicles, scheduled to begin on November 1." (Transportation Equipment)
• "The tariff trade war has negatively impacted agricultural export markets, driving down demand and price. This negatively impacts farmer revenue and the likelihood of farmers investing in new equipment." (Machinery)
• "The unpredictability of the tariff situation continues to cause havoc and uncertainty on future pricing/cost. But even with the tariffs, the cost to import in many cases is still more attractive than sourcing within the U.S. Challenges with tariffs on production equipment necessary for internal production make it difficult to justify expansion of capacity." (Computer & Electronic Products)
• "Volatility in some of our highly exposed commodity markets has tempered a bit, thanks to improved weather conditions and overall downward pressure on pricing. Tariffs continue to remain difficult to quantify, manage and deal with in general, since they continue to impact us day-to-day and our bottom line." (Food, Beverage & Tobacco Products)
• "Wonder has turned to concern regarding how the tariff threats are affecting our business. Orders are down across most divisions, and we've lowered our financial expectations for 2025." (Chemical Products)