Manufacturing slows for first time in 8 mos.

Don Hogsett, October 7, 2002

With the U.S. economy stuck in neutral, and consumers and businesses alike pinching their pennies, manufacturing activity slowed down in September for the first time in eight months, stalling out a sector recovery begun last February, according to a widely watched gauge compiled by the nation's purchasing managers.

The September Purchasing Managers' Index of business activity slipped to a level of 49.5 percent, down from 50.5 percent in August, signaling a decline in activity. A reading of 50.0 percent or more indicates an increase in manufacturing activity, while a reading below that benchmark number spells out an actual decline.

"After a strong first quarter, the manufacturing sector has softened significantly," said Norbert Ore, chairman of the Manufacturing Business Survey Committee of the Institute of Supply Management (ISM), which sponsors the monthly canvass of the nation's purchasing managers.

"Stagnant and sluggish are apt descriptions for manufacturing at this time," Ore commented. "Much of this month's data, as expected when the indexes are at or near the break-even point, is mixed and lacks a clear trend."

In its monthly update on manufacturing activity, the ISM said, "Comments from purchasing and supply executives express concern about energy prices and particularly the possible impact of a war with Iraq. Others indicate recovery is ongoing in their industry, but the rate is slow. Most worry about demand in the short term."

In one piece of good news, the long battered American textiles industry was one of 13 sectors reporting growth in September and has figured as a leading growth industry during the past several months — with the exception of a dip in activity during August.

While the overall manufacturing index may have declined during September, several key indices actually grew during the month, if at a somewhat slower pace. Most notably, both production and new orders continued to grow during the month. The New Orders Index grew to 50.2 percent, up from 49.7 percent the prior month. And the Production Index continued to grow as well, though at a sharply reduced rate from the preceding month.

And while imports into the United States continued to grow, so did export orders, the purchasing managers reported.

On the downside, employment, customers' inventories, employment and backlog of orders all contracted during the month.

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