The US PMI survey for October indicated a continued strong rise in business activity, indicating a strong start to the fourth quarter. However, this growth was confined to the services sector, where industrial output contracted for the third consecutive month. Meanwhile, employment saw a slight decline for a third month as well, amid uncertainty ahead of the presidential election..
Despite this, the level of confidence in the outlook for next year has regained after a sharp decline in September, as companies expected more stability and certainty after the election..
The October survey also showed slower inflation rates for input costs and imposed prices, with the latter falling significantly to its lowest level since May 2020..
The US global S&P Flash manufacturing PMI rose from 47.3 in September to 47.8 in October, demonstrating a continued deterioration in working conditions within the production sector for the fourth consecutive month, but at a slower rate of deterioration compared to previous months. All five components of the index negatively impacted the Supplier Post Delivery Times index, as longer lead times were reported for the first time in three months, as a result of shipping congestion and weather-related disruptions. In supply chains
The biggest negative contribution to the index came from new orders, which fell for the fourth consecutive month, although the rate of decline has slowed from a 15-month peak in September. Inventories followed, which fell at their fastest rate in 14 months, making it the only component that weighed more negatively on the index than in September. Production and employment also fell at lower rates..
October generally reflected hopes that spending would halt and decisions would be postponed before the election, with activity expected to pick up once the political situation became clear.
Employment and production slow, inflation eases in October
In terms of recruitment, the number of employees fell for the third consecutive month in October.
but the decline was modest and less than reported in August and September. The decline in payrolls was most pronounced in the manufacturing sector, although the decline was less severe compared to September. At the same time, the decline in service jobs was slight and was often associated with the lack of replacement of departures rather than layoffs.
October saw a slight rise in average prices of goods and services, marking the smallest monthly increase since May 2020. This moderation represents a contrast to the rise observed in September, which led to inflation falling below the long-term pre-pandemic average..
Inflation in selling prices has declined significantly.
especially in the services sector, where it reached its lowest level in nearly four and a half years. Inflation in the manufacturing sector also fell. In addition, inflation in input costs has slowed, although it remains high by historical standards, especially in the services sector. Despite easing wage pressures, inflation in input costs in this sector remained the third highest on record last year, well above pre-pandemic averages..
Manufacturing input cost growth fell to a seven-month low, driven by lower fuel prices, lower purchases, and increased competition among suppliers..
Meanwhile, manufacturing output fell for the third consecutive month in October.
although the rate of decline slowed to the slowest level recorded during this period. Although new orders fell at a low rate, order losses remained sharp.
as weaker-than-expected sales led to an unplanned increase in unsold inventory levels. As a result, final goods inventories rose for the fourth consecutive month.
keeping the order-to-inventory ratio at one of the lowest levels seen since the global financial crisis, suggesting further weakening of production in the near future.
The importance and impact of the US manufacturing PMI
The USD-spot manufacturing PMI is a key economic indicator that provides insight into the health of the US manufacturing sector. The following is an overview of its importance, methodology and implications:
- Definition
Spot Manufacturing PMI: The Spot Manufacturing PMI is a preliminary measure of manufacturing activity, released before the final PMI report. It is based on a survey of purchasing managers in the manufacturing sector.
Scale: The index is measured on a scale from 0 to 100, where a reading above 50 indicates expansion in the manufacturing sector, and a reading below 50 indicates contraction.
- Ingredients
- Survey responses: The PMI is derived from surveys that ask PMI about various factors, including:
- New Orders
- Production levels
- Supplier Deliverables
- Employment
- Stock levels
- Release schedule
Monthly report: The spot manufacturing PMI is usually released at the end of each month and provides an early indication of manufacturing trends before the final PMI is published a few days later.
- Importance
Economic Health Index: The PMI is a leading indicator of economic health, reflecting business sentiment and potential future economic activity. It helps measure the overall performance of the manufacturing sector, an important component of the U.S. economy.
Market outlook: Traders and analysts often look to the PMI to assess whether the manufacturing sector is expanding or contracting.
affecting their expectations for future economic growth.
- Impact on financial markets
Forex Market: A strong manufacturing PMI could lead to a rise in the value of the US dollar (USD) as it signals a strong manufacturing sector.
which could boost investor confidence in the economy. Conversely, a weak reading could lead to a depreciation of the US dollar.
Stock market: Positive manufacturing data can also boost stock prices, especially for companies in the manufacturing sector