Manufacturing Growth Slows In October, but There Was Some Good News

US manufacturing growth weakened in October as exports, factory production, and inventories declined. However, despite the slower of pace of growth, it marked the 27th straight month of continued expansion in this key sector as well as the 29th consecutive month of expansion in the national economy.

The Institute for Supply Management (ISM) reported that activity in the manufacturing sector dipped down to 50.8 from 51.6 in September, despite expectations that this metric would improve to 52.1. A score above 50.0 indicates expansion, while a score of 50.0 or below signals contraction. The small drop in the ISM index is mainly the result of from declining production (dipped to 50.1 from 51.2), inventories (dipped to 46.7 from 52.0), and exports (dipped to 50 from 53.5).

However, there is some good news in that the new orders index (a signal of future demand) rose to 52.4 from 49.6. In addition, prices paid for raw materials and supplies dropped to 41.0 from 56.0, the lowest point since April 2009. The drop in prices is a relief for manufacturers who’ve had to deal with high commodity prices this year. It also suggests that earlier concerns this year about inflation might be unfounded.

Overall, the decline in the index supports other economic reports that the manufacturing sector has cooled off after an extended period of rapid growth. No doubt contributing to slowdown has been the political turmoil in the US and the debt crisis in Europe.