September Supply Managers

Both of the Institute for Supply Management’s indices continued to grow in September.  The manufacturing measure slipped to 54.4 from 56.3, but any reading over 50 indicates expansion. Manufacturing has grown for 14 months in a row.  The Service sector also expanded for the month. It is now at 53.2 after a 51.5 reading in August.
That the business cycle sensitive manufacturing index managed to stay above the important 50 mark illustrates the factory sector of our economy is growing, but the rate of growth has continued its recent deceleration.  In fact, the index is now at its lowest level since November 2009.  A large part of the drop came from the supplier deliveries component.  Delivery times have shortened suggesting there is some slack building in the manufacturing side of our economy.  Exports fell to 54.5 from the recent may high of 62.0.  It will be interesting to see how this plays out in October with the dollar’s recent weakness.
The service portion of the ISM managed to make up most of its August loss.  In contrast to the manufacturing report, delivery times slowed in the service sector.  This may lead to new hiring as restaurant guests grow tired of waiting for their orders to be served.  The leading portion of the report, new orders, grew as well, suggesting that consumers are ordering more services than last month.
The reports were each positive, but the rate of growth needs to be monitored on the manufacturing side.  With any luck, this indicator will begin to reaccelerate in the final quarter of the year paving the way for the rest of the economy to follow.