US Manufacturing PMI Tops Expectations In September, Hits 10-Month Peak

U.S. manufacturing activity rebounded unexpectedly in September, suggesting the sector may be emerging from a prolonged slump.

The ISM Manufacturing PMI surged to 49, surpassing expectations (47.8) and reaching its highest level since November 2022, but still indicating a slight contraction for the eleventh consecutive month.

ISM Manufacturing PMI: Highlights

Highlights of ISM Manufacturing PMI:

• New Orders Index improved from 46.8% to 49.2% in September, still remaining in a marginal contractionary territory.
• Production Index rose from 50% in August to 52.5% in September, advancing into an expansion.
• Prices Index decreased from 48.4% to 43.8%, raising the prospect of lower input costs for manufacturers.
• Backlog of Orders Index dipped from 44.1% to 42.4%, worsening the contraction.
• Employment Index increased from 48.5% in August to 51.2% in September, entering expansion.

Chart: ISM Manufacturing PMI Recovered In September

The ISM manufacturing PMI has remained below 50 since November 2022, marking the longest contraction since the Great Recession.

Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, called the September improvement a positive sign. Two major manufacturing industries, Food, Beverage & Tobacco Products, and Petroleum & Coal Products, reported growth.

Another sign of recovery came from S&P Global’s US Manufacturing PMI, revised higher to 49.8 in September, up from the preliminary estimate of 48.9 and surpassing August’s final reading of 47.9. This marked the fifth consecutive month of marginal contraction, with output showing a modest increase, the fastest since May.

Market Reactions: Stocks Mixed, Dollar Strengthens

The U.S. stock market started off the week in a mixed fashion, with the SPDR S&P 500 ETF Trust SPY down 0.1%, while the tech-heavy Invesco QQQ Trust QQQ rose 0.6%.

The SPDR Dow Jones Industrial Average ETF DIA was weaker by 0.3%, as a stronger U.S. dollar continued to weigh on blue-chip stocks.

The U.S. dollar index (DXY) soared to 106.80 level, the highest since end-November 2022.

Treasury yields were strongly higher, with the 10-year yield up 8 basis points to 4.65% and the 30-year yield up 6 basis points to 4.76%.

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