Even in the wake of a government shutdown, the U.S. manufacturing industry continues to expand. September was the fourth consecutive month of growth in the manufacturing sector, according to the Institute of Supply Management (ISM), with the ISM's leading index reaching 56.2 percent.
September's Purchasing Manager's Index (PMI) was the highest of the year, representing a 0.5 percent increase over August's level of 55.7 percent. A PMI reading above 50 percent indicates that the manufacturing economy is expanding; below 50 percent indicates that it is contracting. Nearly all other monthly ISM indexes grew in September, with the exception of new orders, which decreased slightly from the prior month to 60.5 percent.
"New orders did decline, but that was from a high of more than 63 percent," said Bradley J. Holcomb, chair of the Institute for Supply Management Manufacturing Business Survey Committee. "Even though that index registered a decrease, it is still growing, albeit at a slightly slower rate. In fact, we've had back-to-back new order numbers above 60, and that hasn't happened since 2011."
The ISM's September employment index also reached a new high, registering 55.4 percent from the August level of 53.3 percent. This isn't just seasonal hiring, Holcomb explains: the ISM adjusts most of its indexes for seasonality.
"All things considered—such as the production numbers remaining strong—we see this as an indication of continued good, solid growth," Holcomb said. The ISM's production index for September reached 62.6 percent, an increase of 0.2 percentage points from August.
The September data bodes well for the rest of the year, Holcomb added. "The average PMI for the third quarter is 55.8, and that compares with an average of 51.5 in the first half of the year—that's more than four points above the first half," he said.
Additionally, comments from the ISM's panel of supply executives were generally positive and optimistic about increasing demand and improving business conditions. The panel has not commented on the effects of a government shutdown, and Holcomb points out sequestration—which has limited U.S. government spending since March— hasn't had a widespread impact across manufacturing industries.
Of the 18 manufacturing industries tracked by the ISM, 11 reported growth in September in the following order: electrical equipment, appliances and components; food, beverage and tobacco products; furniture and related products; petroleum and coal products; fabricated metal products; paper products; printing and related support activities; transportation equipment; computer and electronic products; machinery; and plastics and rubber products.
The six industries reporting contraction in September—listed in order—were: apparel, leather and allied products; primary metals; textile mills; nonmetallic mineral products; miscellaneous manufacturing; and chemical products.