Institute for Supply Management's Manufacturing Index for October fell to 38.9 -- its lowest level since September 1932 -- from 43.5 in September. The ISM Index totaled 49.9% in August. Economists surveyed by Bloomberg News had expected the index to drop to 41.5 in October. An ISM reading below 50 indicates a contraction; above 50, an expansion.
Economist Peter Dawson said one doesn't have to be a Harvard MBA to discern U.S. factory trends. "The U.S. manufacturing sector is in a deep recession, with nary a growth catalyst in sight," Dawson said. "Further, the stats are likely to worsen in the immediate quarter ahead, given the likely slowdown in international trade. Thank goodness the Boeing strike was settled, or who knows what these numbers would fall to in early 2009."
Further, Dawson said he favored a U.S. Government rescue of the U.S. automakers, "if for no other reason than preventing the manufacturing sector from cratering further." He added that he expects the new Congress and president to approve a auto sector rescue package.
Only two sectors reported growth In October: apparel, leather & allied products; and computer & electronic products.
Those reporting a contraction in October were: petroleum & coal products; nonmetallic mineral products; wood products; fabricated metal products; furniture & related products; textile mills; machinery; plastics & rubber products; primary metals; printing & related support activities; transportation equipment; miscellaneous manufacturing; electrical equipment, appliances, & components; paper products; food, beverage & tobacco products; and chemical products.
Meanwhile, the purchasing managers' gauge for new orders fell to 32.2, its lowest level since 1980, and the production indicator declined to 34.1 from 40.8.
Economic Analysis: It's difficult to sugarcoat the October ISM manufacturing statistic. Simply, the U.S. needs both domestic and foreign economic growth catalysts to jump-start manufacturing. U.S. infrastructure spending could fill a portion of the domestic catalyst component.
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