US manufacturing sector contracts in October - ISM

The US manufacturing sector unexpectedly contracted in October, according to data released on Wednesday.

The Institute for Supply Management’s manufacturing purchasing managers’ index declined to 46.7 from 49.0 in September. This was the 12th month in a row the reading came in below the 50.0 mark that separates contraction from expansion.

Analysts had been expecting the reading to be unchanged.

The new orders index pushed further into contraction territory, falling to 45.5 in October from 49.2 the month before, while the production index printed at 50.4, down from 52.5.

The prices gauge was 45.1, up from 43.8 in September, while the backlog orders index came in at 42.2, versus 42.4 a month earlier. The employment index was 46.8 last month, down from 51.2 in September.

Andrew Hunter, deputy chief US economist at Capital Economics, said the surprise slump in the index suggests the recent recovery in factory-sector activity is fading and supports CE’s view that the upturn in economic growth in the third quarter is set to be reversed.

He added: "The survey also indicates that inflationary pressures in the goods sector remain unusually weak. Although the prices paid index picked up slightly to 45.1, it remains at a level that has historically coincided with CPI inflation of barely more than zero.

"In a further encouraging sign for the Fed, we also learned today that the job openings and quits rates were unchanged in September - with the latter already consistent with wage growth slowing to between 3.5% and 4.0% over the coming months. Overall, today’s data releases provide little support for the idea that the Fed needs to raise interest rates further."