The performance of the US manufacturing economy improved again in October, with both output and new orders rising at stronger rates. However, growth was domestic led as new exports fell due to tariffs reportedly negatively impacting international trade.
Challenges in predicting future trade policy also served to limit confidence in the outlook, although some manufacturers expect to benefit in time from the reshoring of industrial output to the United States. Tariffs also continued to underpin a steep level of cost inflation in the manufacturing economy.
Employment growth meanwhile remained modest amid evidence of spare plant capacity. Moreover, firms added to their warehouse inventories at an unprecedented pace as production volumes remained more than sufficient to satisfy workloads.
The headline index from the report, the seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index (PMI), recorded 52.5 in October, compared to 52.0 in September. That signaled a third successive month that the PMI has posted above the critical 50.0 no-change mark and indicative of a solid improvement in operating conditions that was in line with the survey’s trend pace.
The PMI was supported in October by concurrent and accelerated gains in both output and new orders. Tariffs also remained a dominant theme in firms’ assessment of future output trends, although the uncertainty around trade policies again made predicting future output challenging.
Overall confidence remained historically subdued and dropped to its lowest since April, despite some firms expecting to benefit from a reshoring of industrial production and domestic demand in the months ahead.