In October, manufacturing activity in the United States expanded at its weakest rate in almost two and a half years as a result of the Federal Reserve's vigorous campaign to raise interest rates in an effort to control inflation.
The Purchasing Managers Index, published by the Institute for Supply Management, dropped from 50.9 in September to 50.2 last month, marking the lowest readings since May 2020.
11.9 percent of the US economy is made up of manufacturing, and a value above 50 indicates expansion in this sector. According to Reuters' poll of economists, the index was expected to fall to 50.
On Wednesday, the Fed is anticipated to increase rates for a fourth consecutive time by 75 basis points, the quickest rate of tightening in 40 years. In an effort to combat persistently high inflation, the US central bank raised its benchmark policy rate from near zero to a range of 3 percent to 3.25 percent since March.
Despite a decline in manufacturing activity overall, the institute's forward-looking new orders subindex showed some resilience among US consumers even as the Fed's measures started to hurt their wallets, rising to 49.2 last month from 47.1 in September.
According to official statistics issued on Friday, spending on products gained little in September after falling for two consecutive months, but spending on services increased significantly. A portion of the manufacturing slowdown can be attributed to this change in consumer expenditure from products to services.
The institute's gauge of supplier deliveries decreased from 52.4 in September to 46.8 in a further indication that supply chain bottlenecks that have plagued manufacturing are improving. A value exceeding 50 signifies slower factory deliveries.
Pressures on inflation at the factory gate continued to decrease as supply chains began to operate more normally.
A gauge of prices paid by manufacturers decreased from 51.7 in September to 46.6, the lowest figure since May 2020. Since March, the price index has decreased by about 50% as a result of declining commodity prices.
For the US central bank, which hasn't noticed much improvement in other inflation indices, that's good news. In September, US producer prices rose more than anticipated, and consumer inflation is still out of control.The institute's gauge of factory employment increased last month from 48.7 in September to 50. The government's carefully regarded jobs report, which is due out on Friday, has shown that the index has a dismal track record of predicting manufacturing payrolls.
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