The US manufacturing sector remained in contraction territory in October amid output weakness ahead of the presidential election, as indicated by two separate surveys from the Institute for Supply Management and S&P Global. The ISM's purchasing managers' index fell to 46.5 last month, the lowest reading of this year, down from 47.2 in September.
The consensus forecast was a 47.6 print in a survey compiled by Bloomberg. A reading below 50 indicates the manufacturing sector is generally contracting, with the 12-month average standing at 47.9. "Production execution eased in October, consistent with demand sluggishness," stated Timothy Fiore, chair of the ISM's manufacturing business survey committee.
"Demand remains subdued, as companies continue to show an unwillingness to invest in capital and inventory due to concerns about federal monetary policy direction in light of the fiscal policies proposed by both major political parties." The survey revealed that 11 manufacturing industries reported contraction in October, while five reported growth.
The production index declined to 46.2 last month from 49.8 in September, while new orders improved to 47.1 from 46.1. The employment index also saw an increase, rising to 44.4 from 43.9. "US manufacturing remains one of the few soft patches in a resilient economy," commented BMO Capital Markets Senior Economist Priscilla Thiagamoorthy in a report.
Data released earlier in the week indicated that consumer spending accelerated more than expected in September, while the economy expanded at a slower-than-projected rate in the third quarter. Meanwhile, S&P Global reported that its manufacturing PMI increased to 48.5 in October from 47.3 the previous month, amid "weaker reductions" in output and new orders.
The consensus among analysts had predicted a 47.8 reading in a Bloomberg poll. "Although the rate of decline moderated, order books continued to deteriorate at a worryingly steep pace, and a further build-up of unsold stock hints at further production cuts at factories in the coming months unless demand revives," stated Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. Williamson also noted that hurricane-related supply disruptions are expected to ease this month.
"Manufacturers are feeling more positive about the outlook than at any time since May, hoping that demand will pick up once the uncertainty generated by the presidential election clears." The election is scheduled for Tuesday..