For the first time in 36 years, the manufacturing sector is contracting; the ISM manufacturing index printed at 48.6. New orders dropped 4 points to 48.9 while production decreased 3.7 points to 49.2. Only 5 of 18 industries expanded. The anecdotal comments explain the underlying reasons:
“The oil and gas industry is realizing that [the] ‘low’ oil prices are now the new reality with expectations to continue at this level for some time.” (Petroleum & Coal Products)
“Still seeing deflation in raw materials.” (Chemical Products)
“Bookings and new orders are lower than expected.” (Computer & Electronic Products)
“Automotive remains strong.” (Fabricated Metal Products)
“Business is still good.” (Transportation Equipment)
“Downturn in China and European markets are negatively affecting our business.” (Machinery)
“Strong dollar is slowing our sales to China as they can buy in Europe.” (Primary Metals)
“Medical device continues to be strong.” (Miscellaneous Manufacturing)
“Incoming orders have leveled off from the summer.” (Furniture & Related Products)
“Month-over-month conditions are stable.” (Food, Beverage & Tobacco Products)
The strong dollar, weak oil market and slowing international environment continue to provide headwinds for this sector.
In contrast to the manufacturing sector, services continue to expand. While the headline number declined 3.2%, it still printed 55.9. Other sub-indexes are all still in strong territory. There is, however, a bit of softness to anecdotal comments:
“Customers’ outlook on their revenues is softening.” (Management of Companies & Support Services)
“Moderate activity level. Some suppliers are providing longer lead times due to their own increased backlog.” (Professional, Scientific & Technical Services)
“Conditions are holding steady for a profitable year and 4th quarter.” (Finance & Insurance)
“Affordable Care Act impacting our business, reducing revenue while increasing cost of care. Several states consolidating medical/behavioral providers which have impacted existing business negatively.” (Health Care & Social Assistance)
“Overall food [cost of goods sold] (COGS) has remained generally lower throughout 2015 due to strong dollar, less exports to other countries and low corn prices.” (Accommodation & Food Services)
“Continuing competitive pressure in the grocery retail industry has led to implementation of lower prices across all markets and increased focus and efforts from the organization to reduce cost of goods [sold].” (Retail Trade)
“Q4 retail expectations high, and prep for December peak volumes up in all aspects of staffing, inventory build, and supply purchasing.” (Transportation & Warehousing)
“Year-over-year sales for the same month are down 3 percent.”(Wholesale Trade)
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