U.S. factory activity shrank in October for an eighth straight month, driven by a pullback in production and tepid demand.
The Institute for Supply Management’s manufacturing index eased 0.4 points to 48.7, according to data released Monday. Readings below 50 indicate contraction, and the measure has been stuck in a narrow range for most of this year.
The group’s production index slid 2.8 points to 48.2, marking the second month in the past three that output has contracted. The weakness is keeping head counts depressed. The ISM’s employment gauge shrank for a ninth straight month, albeit at a slightly slower pace than in September.
Manufacturers are still concerned about the general lack of clarity about trade policy from the Trump administration, Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said on a call with reporters.
“It’s the overall tone of we don’t know what country is coming next, we don’t know what commodity is coming next,” Spence said.
Meanwhile, inflationary pressures continued to ease. The index of prices paid for raw materials fell nearly 4 points to 58, the lowest since the start of the year. Since a recent peak in April, during the height of the tariffs rollout, the price gauge has dropped nearly 12 points.
“The most encouraging aspect of the report was the 3.9-point fall in the prices paid index to 58.0, its lowest level since tariffs were imposed,” Thomas Ryan, North American economist at Capital Economics, said in a note. “This brings the index back in line with its 10-year average and indicates the worst of the tariff-driven pressure on manufacturers’ input costs is likely behind us.”
Economists and policymakers are relying more on private reports such as the ISM survey for clues on the economy and job market in the absence of official data because of the U.S. government shutdown. Friday’s scheduled employment report is also poised to be delayed as a result.
“For every comment on hiring, there were 3.4 on reducing employment,” Spence said in a statement. “Companies continued to focus on accelerating staff reductions due to uncertain near- to mid-term demand. Layoffs and not filling open positions remain the main head count management strategies.”
A dozen manufacturing industries contracted in October, led by textiles, apparel and furniture. Six industries, including primary metals and transportation equipment, reported growth.
The survey illustrates general malaise among the nation’s manufacturers, who are contending with lingering uncertainty around trade policy. Producers are navigating evolving supply chains as they source materials. The ISM measure of supplier deliveries rose to a four-month high, indicating longer lead times.