Manufacturing in U.S. stagnated in October on weak exports

WASHINGTON – American manufacturing remained stuck in neutral in October as factories struggled with dwindling overseas demand and well-stocked customers at home.

The Institute for Supply Management’s index was little changed at 50.1, the weakest since May 2013, after 50.2 in September, a report from the Tempe, Ariz.-based group showed Monday. A reading of 50 is the dividing line between expansion and contraction.

Soft global sales, a strong dollar that’s made U.S. goods more expensive overseas, record first-half inventory growth and energy-sector woes have hounded the nation’s producers. At the same time, increased auto output in response to the best sales in a decade remains a bright spot for manufacturing.

“We’re obviously not in a robust growth mode here,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters. Companies “may be taking a litle bit of a break to sort of see in what direction things are going” before expanding employment.

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Half of the 18 industries surveyed by the purchasing managers’ group shrank, including metals, petroleum and plastics. Seven industries posted growth.

The median forecast in a Bloomberg survey of economists called for an ISM reading of 50, with estimates ranging from 48.9 to 51.5.

The standstill in manufacturing is leading to fewer job opportunities on factory floors. The ISM group’s measure of employment decreased to 47.6 in October, the weakest reading since August 2009, from 50.5 a month earlier.

Only five of the 18 industries reported expanding employment, the fewest since 2009.

The index of export orders improved to 47.5 from 46.5, marking the fifth straight month of contraction.

Customer inventories

While customers of producers made some progress in October trimming inventories as the index dropped to 51 from 54.5, last month’s reading was the third-highest since early 2009.

The ISM’s report also showed the index of prices paid rose to 39 from 38.

The economy grew at a 1.5 percent annualized rate in the third quarter, hurt by an inventory correction, according to Commerce Department gross domestic product data released last week. Consumer spending climbed 3.2 percent, while further cutbacks on drilling rigs and mines resulted in a drop in investment in nonresidential structures.

New orders

Other indexes in the report signaled U.S. manufacturing is stabilizing. The new orders gauge climbed to 52.9 from 50.1, and a measure of production also rose to 52.9, from 51.8. The index for orders waiting to be filled contracted for a fifth straight month.

Automobile demand has helped bolster factory production. The GDP report showed motor vehicle output increased at a 14.9 percent annualized rate in the third quarter after a 14.5 percent advance.

Sales of cars and light trucks posted an 18.1 million annualized rate in September, the strongest since 2005, according to Ward’s Automotive Group.

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