Manufacturing ISM Slows to Near Stagnant Growth Level

Manufacturing ISM fell more than expected in October to 50.9 (consensus 51.5) from 52 the prior month. This indicates that manufacturing growth slowed, but did not contract. A reading below 50 indicates negative growth. This was the lowest reading in seven months. Sluggish demand growth is especially apparent for construction equipment, furniture and appliances, due to the housing slump.

New orders fell a point to 52.5, showing an accelerating pace of slowing over the past four months. Production slipped into contraction for the first time since January, posting a reading of 49.6 (down 5 points from the prior month). The backlog of orders also fell below 50, declining five points to 46. Inventory stockpiles are being replenished as the inventory index rose from 41.6 to 47.2. It is not clear if this is voluntary ( trying to buy before prices rise) or involuntary. Export orders remain a bright spot, expanding to 57 from 54.5. Imports fell to 47.5 from 53. Prices rose, as expected, mainly due to higher energy and commodity input costs.

Net, manufacturing is still growing, but at a very weak pace.