EmailThe ISM Index held its ground in September and remained above the expansion/contraction threshold. Manufacturing activity sped up slightly as the index increased from 50.6 in August to 51.6 in September. The Briefing.com consensus expected the ISM index to fall to 50.5.
The slight gain in the ISM index was at odds with the majority of the regional manufacturing surveys. With the exception of the Chicago PMI and the Kansas City Fed's Survey of Tenth District of Manufacturers, all regional Fed surveys were in a contraction zone in September. This included the worst reading of the New York Fed's Empire Manufacturing Survey since November 2010.
Production expanded in September as the index recovered from a contraction reading (48.6) in August to 51.2.
Growth in the ISM Index, however, and especially the Production Index, will be tough to sustain.
The gains in production were due to a further paring down of order backlogs. The Backlog of Orders Index fell from 46.0 in August to 41.5 in September. That was the worst reading since April 2009. New orders contracted for the third consecutive month as the respective index remained at 49.6. Unless new orders pick up in the near future, manufacturers may not have a large enough supply of backorders to facilitate continued production growth.
