US manufacturing activity contracts for seventh straight month

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US factory activity shrank in September for a seventh consecutive month, reflecting a pullback in orders and adding to evidence manufacturing is lacking traction.

The Institute for Supply Management’s manufacturing index edged up 0.4 point to 49.1, according to data released Wednesday. Readings below 50 indicate contraction, and the measure has been stuck in a narrow range for the whole year.

The group’s orders index slid 2.5 points to 48.9, slipping back into contraction territory after expanding a month earlier for the first time since January. Factory employment shrank less in September but remained historically depressed.

“Regarding output, the production and employment indexes improved, though 64% of panelists’ comments still indicated that managing head count is still the norm at their companies, as opposed to hiring,” Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

Economists and policymakers will be relying more on private reports such as the ISM survey for clues on the economy in the absence of official data because of the US government shutdown.

Eleven industries reported a contraction in September factory activity, led by wood products, apparel, plastics and rubber, and paper. Five industries expanded.

What Bloomberg Economics Says...
“We’re taking more signal from the soft demand-side factors than from the monthly uptick in production activity. It seems supply-chain stress isn’t being caused by robust demand, but is more likely due to trade policy.” — Stuart Paul, economist

The report also showed manufacturers enjoyed a respite from inflationary pressures for raw materials. The prices-paid measure dropped for a third straight month, the longest such stretch since 2022, to 61.9. That’s the lowest level since the start of the year, prior to the Trump administration’s implementation of tariffs.

A further easing in input-price growth may temper price pressures for consumers. Government figures last week showed prices for goods such as appliances, household supplies and recreational goods and vehicles fell in August, spurring stronger purchases. Spending on merchandise climbed 0.7%.

Select ISM Industry Comments
“Business continues to be severely depressed. Profits are down and extreme taxes (tariffs) are being shouldered by all companies in our space. We have increased price pressures both to our inputs and customer outputs as companies are starting to pass on tariffs via surcharges, raising prices up to 20%.” — Transportation Equipment

“The tariffs are still causing issues with imported goods into the U.S. In addition to the cost concerns, product is being held up at borders due to documentation issues. The inflation issues continue; low volumes are a constant concern. “ — Chemical Products

“Ongoing macroeconomic conditions highlighted by interest-rate management and tariffs continue to impact customer purchasing decisions, resulting in subdued production rates and growing cost concerns on direct material and operations.” — Machinery

“Customer orders are depressed for heavy machinery because tariffs are so impactful to high-end capital equipment. Revenue expectations are flat for the rest of 2025, with no outlook to improve in 2026.” — Electrical Equipment, Appliances & Components

“The semiconductor industry is being impacted by high tariff prices on parts from Korea, China and Europe. Our industry is at a low point right now as we race to get new nanotechnology in the US” — Computer & Electronic Products

“Business is slowing down. Order books are softening as customers push orders out. Seems to be stemming from concerns about the direction of the U.S. economy.” — Plastics & Rubber Products

“Tariffs still affecting vast amounts of increases in hardware, Al (artificial intelligence) and stainless steel. MRO (maintenance, repair and operating) products have continually increased, and the slowdown in agriculture has had stark impacts on bottom lines for raw materials.” — Fabricated Metal Products

The ISM survey also showed inventories at manufacturers shrank by the most in four months, suggesting producers were able to partially fill the pickup in August orders with existing stockpiles. Meanwhile the ISM’s production gauge increased 3.2 points to 51.

In a sign factory production will remain stable in coming months, the ISM measure of customers’ stockpiles dropped to 43.7, matching the lowest level in nearly three years.