ISM manufacturing index eases back from September's 13-year high

Lloyd Doyle
November 1, 2017

The inventories index registered 48 points, down 4.5 points from the previous month.

Although economic activity expanded, the October PMI decreased 2.1% to 58.7% after reaching past 60% in September.

The pullback by the headline index reflected slowdowns in new orders and production growth, as the new orders index dropped to 63.4 in October from 64.6 in September and the production index fell to 61.0 from 62.2.

The Purchasing Managers Index (PMI) of the manufacturing sector of the economy stood at 55.0 index points in October 2017, as against 55.3 in September, indicating expansion in the manufacturing sector for the seventh consecutive month, according to the Central Bank of Nigeria (CBN). The composite index is the seasonally adjusted diffusion indices of new orders, production, employment, supplier deliveries and inventories, with the highest weightage given to new orders at 30 percent and the lowest to inventories at 10 percent.

Those declines "were the biggest contributor to the PMI expansion reduction, reflecting the impact of supply-chain difficulties post-hurricane", said Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee. The Production Index came in at a strong 61% and the Employment Index at 59.8%, a decline of just 0.5% from the September reading of 60.3%. Hurricane Harvey hit energy-producing regions of Texas on August 25 and stalled over the state for days. The employment gauge cooled only slightly to 59.8 from a red-hot 60.3. Fifteen industries reported expansion, while one reported a decrease in employment. Prices continue to remain under pressure. Out of the 18 industries representing the manufacturing sector, 17 reported growth in September, while furniture and related products contracted. Output growth remained unchanged month-on-month and is now at 14-month lows, with future expectations for growth falling to the lowest in four months. Readings above 50 signal expansion, while those south of 50 suggest contraction.

Pantheon Macroeconomics economist Ian Shepherdson said it was always going to be a struggle to match September's 13-year high, pointing out that this is a "very strong" report nonetheless. The subsectors reporting growth are listed in the order of highest to lowest growth, while those reporting contraction are listed in the order of the highest to the lowest contraction.

Read the ISM release.

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