The numbers: A closely-watched index that measures U.S. manufacturing activity fell 2.3 points to 46.7 in October, according to the Institute for Supply Management on Wednesday. This is the lowest level since July.
Economists surveyed by the Wall Street Journal had forecast the index to inch up to 49.2%.
Any number below 50% reflects shrinking activity. Manufacturing has been contracting for the past year.
Key details: New orders were weaker in October. Production and employment also declined.
Only two manufacturing industries reported growth while 13 reported contraction.
A separate report on manufacturing, the S&P Global Markit PMI rose to 50 last month from 49.8 in September.
Big picture: Manufacturing had reached a floor of 46 in June and was starting to rebound, but higher interest rates caused firms to pull back capital spending plans, economists said. In addition, the United Auto Workers strike might have had some impact on the data. Sian Jones, principal economist at S&P Global Market Intelligence said the factory sector was stabilizing.
Industry comments: “Seeing a slowdown on bookings, and our backlog is down to five days from 15 weeks earlier this year,” said an ISM contact in the manufacturing sector.
What ISM said? The decline in new orders was a the main concern, said Timothy Fiore, chair of the ISM’s factory survey committee. The backlog of orders is also extremely weak. “New orders are not there. That’s a concern,” Fiore said. Tight Federal Reserve monetary policy could be playing a role in reducing investment spending, he added.
Market reaction: Stocks
DJIA
SPX
were higher in early trading while the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was down to 4.80%.
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