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Manufacturing in U.S. Expanded at Modest Pace in September

It was a positive month for U.S. manufacturing, just barely. And it looks to be coming from companies reducing inventory and employees.

Author: Shobhana Chandra

U.S. manufacturing expanded at a modest pace in September after unexpectedly shrinking a month earlier, underscoring limited progress for the battered sector.

The Institute for Supply Management's index advanced to 51.5 from August's 49.4 reading that marked the first contraction in six months, figures from the Tempe, Arizona-based group showed Monday. A reading above 50 signals growth.

New orders and production swung into expansion territory last month, indicating prospects are gradually improving across America's manufacturing landscape. At the same time, factories continued to focus on becoming leaner by trimming inventories and cutting employment.

"What we have is more akin to a slow patch in manufacturing," Scott Brown, chief economist for Raymond James Financial Inc. in St. Petersburg, Florida, said before the report. "As the overall pace of economic growth slows, some sectors of the economy look weaker."

The median forecast in a Bloomberg survey of 78 economists called for a reading 50.4. Estimates ranged from 47.7 to 52.

Seven of 18 industries surveyed by the purchasing managers' group posted growth, including furniture, textiles, and computer and electronic products. The 11 industries that reported contraction included machinery; petroleum and coal products; and transportation equipment.

The ISM new orders gauge jumped to 55.1 from 49.1 the prior month, the biggest increase since March. The group's measure of production rose to 52.8 from 49.6. The index of export demand was little changed at 52 from 52.5.

A gauge of factory employment improved to 49.7 in September from 48.3 in August, continuing the streak of contractions in all but one month so far this year.

"We've got momentum albeit it's not particularly robust," Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters.

Some gauges improved while still signaling contraction. The measure of factory inventories edged up to 49.5 after 49, while order backlogs increased to 49.5 from 45.5. The index for customer stockpiles climbed to 53 from 49.5.

The report also showed the index of prices paid held at 53.

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