The Amounts: A key measure of U.S. factories has been negative for five months in a row, which shows that the manufacturing sector of the economy is still in a deep slump that may not end until after the election.
From a low point of 46.8% eight months ago to 47.2% now, the Institute for Supply Management’s industrial index slowly rose. If the number is less than 50%, it means that the industry sector is shrinking.
“Demand remains subdued,” said Timothy Fiore, chairman of the ISM survey. “Companies are unwilling to invest in capital and inventory because of [uncertainty about] the election and high interest rates.”
An indicator of the economy’s health is the ISM report on manufacturing and service-based businesses. The Wall Street Journal asked economists and found that most of them thought the index would go up a little last month.
Key details:
- New order index dropped 2.8 points to 44.6%, which is the lowest level it has been in more than two years.
- It went down 1.1 points to 44.8% on the output barometer. Not since the economy shut down in May 2020 during the height of the pandemic has it been that low.
- The job rate went up by 2.6 points to 46.0%, which is still very low.
- It is a way to measure inflation. The price index went up by 1.1 points to 54.0%. It’s still a bit higher than it was the year before the pandemic.
In the big picture, producers should get a boost from the possibility of lower U.S. interest rates after a long slump. Because inflation is going down, the Federal Reserve will almost certainly start cutting rates in the middle of September.
Fiore did warn, though, that the benefits of lower rates might not show up right away. He said companies are waiting to make plans until they know how the election turned out and what policies the new president will push for.
He said, “I think we’re stuck here until the end of the year.”
In the future: “Customers said they had been given permission to buy equipment with borrowed money, but they were told to put their plans on hold until the fourth quarter of 2024.” “This shows how uncertain the election is,” a top executive from the machinery told the ISM.
