The numbers: A closely-followed index of U.S.-based manufacturing inched lower to 60.8% in October from 61.1% in the prior month, the Institute for Supply Management said Monday.
Economists polled by The Wall Street Journal had forecast a reading of 60.3%. Any number above 50% signifies growth. The index has been above the growth threshold for 17 straight months.
Key details: There was a notable drop in the new-orders index, which fell 6.9 points to 59.8%. The production slipped 0.1 points to 59.3%,the ISM reported.
On the eve of the October jobs report, the employment index rose 1.8 points to 52%, while the prices index shot up 4.5 points to 85.7%. The new-exports-orders index rose 1.2 points to 54.6%.
Order backlogs fell 1.2 points to 63.6% while supplier deliveries rose 2.2 points to 75.6%.
Big picture: Manufacturing is struggling with supply and shipping difficulties that aren’t seen as easing anytime soon. Labor shortages are at the heart of the woes. But despite these constraints, the sector has been able to continue to grow and sentiment in the industry remains strong.
What ISM is saying: The drop in new orders could be tied to supply managers waiting to see if prices retreat in coming weeks, said Timothy Fiore, chair if the ISM’s manufacturing survey committee. There were tentative signs of prices declining, notably for steel.
What are economists saying? “The manufacturing ISM index… level remains elevated, signaling ongoing expansion and positive momentum in the sector going into the fourth quarter. Order backlogs and low inventories are supportive of
manufacturing activity. But constraints from supply bottlenecks and shortages, of parts and labor, are headwinds that could weigh on output in the near term,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.