U.S. Manufacturing Shows Sluggish Growth, Survey Shows

US manufacturing activity grew at its slowest pace in nearly 2-1/2 years in September as new orders contracted amid aggressive interest rate increases from the Federal Reserve to cool demand and tame inflation, Lucia Mutikani reported for Reuters.

Photo Insert: Nine manufacturing industries, including machinery, transportation equipment, and computer and electronic products reported growth.

The Institute for Supply Management (ISM) survey on Monday also showed a measure of manufacturing employment contracted last month for the fourth time this year. A gauge of inflation at the factory gate decelerated for a sixth straight month.

ISM Manufacturing Business Survey Committee chair Timothy Fiore said "companies are now managing head counts through hiring freezes and attrition to lower levels, with medium- and long-term demand more uncertain."

Fiore, however, noted that there were no comments from firms about large-scale layoffs, which he said indicated that "companies are confident of near-term demand." The Fed's tighter monetary policy campaign has raised fears of a recession next year, triggering a sharp sell-off in the stock market.

"In many ways, this is the cooling economy the Fed would like to see," said Will Compernolle, a senior economist at FHN Financial in New York. "It could, however, merely reflect a consumer shift away from goods towards services."

The ISM's manufacturing PMI dropped to 50.9 this month, the lowest reading since May 2020, from 52.8 in August. ISM said the fall in the index "reflects companies adjusting to potential future lower demand."

A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the US economy. Economists polled by Reuters had forecast the index slipping to 52.2.

Nine manufacturing industries, including machinery, transportation equipment, and computer and electronic products reported growth. Furniture and related products as well as textile mill and wood products were among the seven industries reporting a contraction.

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