U.S. manufacturing took a step further towards recovery in September as production picked up and employment rebounded, according to a survey on Monday that also showed prices paid for inputs by factories falling considerably.
The third straight month of improvement reported by the Institute for Supply Management strengthened economists' expectations that economic growth accelerated in the third quarter, despite higher interest rates. That was reinforced by a Commerce Department report showing construction spending was solid in August, driven by the building of houses and factories.
Among the 11 industries reporting contraction were computer and electronic products, machinery, as well as electrical equipment, appliances and components. Apparel, leather and allied products makers described markets as "soft," while primary metals producers said "business conditions and market demand remain strong," and they "projected to be at capacity in the next 12 months." Petroleum and coal products manufacturers said "a recession feels imminent."
The ISM survey's forward-looking new orders sub-index increased to 49.2 last month from 46.8 in August. With new orders improving, production at factories accelerated. The production index increased to 52.5 from 50.0 in the prior month."This compares to an average of 139 days in over the period 2015-2019, indicating that it still takes a long time to order, obtain, and install business equipment," said Conrad DeQuadros, senior economic adviser at Brean Capital in New York.
"High oil prices may present headwinds for some parts of the economy and not every manufacturer celebrates higher prices for crude, but on balance high oil prices are associated with brisk activity in manufacturing," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.
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