Decreased exports were cited as a cause of a key manufacturing index contracting in September. | Via Manel/Flickr

Report shows worst US manufacturing decline in a decade



U.S. manufacturing has contracted to its weakest level since the last month of the Great Recession, according to a new industry report.

The Institute for Supply Management said Tuesday that the Purchasing Managers’ Index, or PMI, dropped 1.3% to 47.8% in September, the lowest reading since June 2009. A PMI reading below 50% indicates general contraction in the manufacturing sector.

The PMI drop continues six months of softening in manufacturing since March, the report said, when PMI was 55.3%. The report primarily attributes these contractions to decreases in consumption and export orders.

“Comments from the panel reflect a continuing decrease in business confidence,” said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee.

Consumption, which is measured by the Production and Employment indexes, contracted at a faster rate due to lack of demand. The Production Index dropped 2.2% to 47.3%, and the Employment Index fell 1.1% to 46.3%.

The New Export Orders index dropped 2.3% to 41%, the lowest level since March 2009. Respondents of the ISM survey noted increased difficulty in transporting products from China as well as difficulty from increased tariffs on Chinese goods.

“Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019,” Fiore said in the report. “Overall, sentiment this month remains cautious regarding near-term growth.”

ISM’s findings on national manufacturing echo an earlier projection by the Federal Reserve Bank of Kansas City. Last month, the Kansas City Fed said its composite manufacturing index fell to -6, the most negative level since March 2016. The Fed report noted that over 55% of regional firms expect negative impacts from U.S. tariffs on imports from China.

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