US manufacturing activity in October fell to the lowest level in nearly two and a half years, but gains in production and new orders and improved supply chain performance provided some resilience.
The Institute for Supply Management's (ISM) manufacturing purchasing managers index (PMI) fell to 50.2pc in October, down from 50.9pc in September and the lowest since May 2020 when it came in at 43.5pc as the economy was emerging from the pandemic-induced recession. A reading under 50 signals contraction, while higher than 50 signals growth.
"The US manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began," ISM said.
The ISM's production index rose on the month by 1.7 percentage points to 52.3pc, showing accelerating growth.
The new orders index registered 49.2pc, easing contraction from 47.1pc in September, but still reflecting that companies are "preparing for potential future lower demand," ISM said.
The Federal Reserve is expected to hike its target lending rate tomorrow by 75 basis points, its fourth such consecutive increase, as it battles to quash inflation at four-decade highs. The Fed is raising rates to crimp borrowing and demand, and is seeking to slow the economy and the labor market, where unemployment is at a five-decade low, without inducing a recession.
The Labor Department on Friday is expected to report that the economy added about 200,000 jobs in October, showing a slowing but still resilient labor market.
The ISM's supplier delivery index fell in October to 46.8pc, a 5.6 point decline and the first reading under 50 since February 2016. Lower readings indicate faster deliveries, so improved delivery speeds last month weighed on the PMI.
ISM's new export order index fell by 1.3 points to 46.5pc, while the employment index was up by 1.3 points at the 50 breakeven point.
The prices index fell by 5.1 points to 46.6pc, the lowest since May 2020, as the ISM showed commodity prices falling for the first time in 28 months.
