U.S. manufacturing expanded at a modest pace in September after unexpectedly shrinking a month earlier, underscoring limited progress for the sector.
The Institute for Supply Management’s index advanced to 51.5 from August’s 49.4 reading that marked the first contraction in six months, according to figures released Monday from the Tempe, Arizona-based group. As always, any reading above 50 signals growth.
New orders and production swung into expansion territory last month, indicating prospects are gradually improving across America’s manufacturing landscape. At the same time, factories continued to focus on becoming leaner by trimming inventories and cutting employment.
“What we have is more akin to a slow patch in manufacturing,” Scott Brown, chief economist for Raymond James Financial Inc. in St. Petersburg, Florida, said before the report. “As the overall pace of economic growth slows, some sectors of the economy look weaker.”
The ISM new orders gauge jumped to 55.1 from 49.1 the prior month, the biggest increase since March. The group’s measure of production rose to 52.8 from 49.6. The index of export demand was little changed at 52 from 52.5.
A gauge of factory employment improved to 49.7 in September from 48.3 in August, continuing the streak of contractions in all but one month so far this year.
Some gauges improved while still signaling contraction. The measure of factory inventories edged up to 49.5 after 49, while order backlogs increased to 49.5 from 45.5. The index for customer stockpiles climbed to 53 from 49.5.
The report also showed the index of prices paid held at 53.
On the other side of the Atlantic, manufacturing in the euro area accelerated in September as incoming new business grew at the fastest pace in three months.
A Purchasing Managers Index for manufacturing rose to 52.6 from 51.7 in August, in line with earlier estimates. The expansion was driven by stronger demand from both domestic and international customers, the London-based company said in a statement.
While the report indicates a rebound in confidence after a third quarter marked by political uncertainty and signs of a slowdown, the improvement remains patchy. Headwinds include slumping demand and the fallout from the U.K.’s decision to leave the European Union, as well as concern that European Central Bank stimulus is reaching the limit of its effectiveness.
Germany’s manufacturing PMI rose to a three-month high, and the second-best reading in two-and-a-half years, Markit said. Strong performances were also seen in the Netherlands and Austria. Spain, Italy, and Ireland registered weaker growth, while manufacturing in France continued to decline and Greece slipped into contraction.
By Shobhana Chandra
