U.S. manufacturing activity. grew at the slowest pace in nearly 2-1/2 years in October, while a measure of the price businesses paid for inputs fell for a seventh straight month, following the Federal Reserve's aggressive push to raise interest rates to stamp out inflation that has been holding back demand for goods.
The Institute for Supply Management (ISM) said on Tuesday that its manufacturing PMI fell to 50.2 last month from 50.9 in September, both the lowest readings since May 2020.
A reading above 50 signals an expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index falling to 50.0.
The Fed is expected to raise rates by 75 basis points for the fourth time in a row at the end of its next policy meeting on Wednesday, the fastest tightening rate in 40 years. Since March, it has raised its benchmark policy rate from near zero to the current range of 3.00% to 3.25% as it grapples with very high inflation.
At the same time overall manufacturing activity also fell. The new orders sub-index of the forward ISM survey meanwhile rose to 49.2 last month from 47.1 in September, showing some resilience among U.S. consumers. despite the Fed's actions squeezing their financial position.
The amount was the same as government data last Friday which showed spending on goods in September rose slightly after two consecutive monthly declines while spending on services rose strongly. Some of the slowdown in manufacturing has reflected a shift in spending from goods to services.
On the other hand there were indications that the supply chain disruptions that hit manufacturing are recovering, the ISM measure of supplier shipments fell to 46.8 from 52.4 in September. A reading above 50 indicates slower delivery to the factory.
With the supply chain functioning more normally, inflationary pressures at the factory gates continue to recede. A measure of prices paid by manufacturers fell to 46.6, the lowest reading since May 2020, from 51.7 in September. The price index has fallen nearly 50% since March, driven by falling commodity prices.
The US dollar index strengthened against six major currencies after the release of ISM PMI data. However, it was still traded down by 0.16% to a trading level of 111.237.
