US manufacturing growth slowed in October, industry survey data showed Tuesday, remaining at its weakest since mid-2020 on falling orders and as prices drop for the first time in more than two years.
Manufacturing output has held up despite disruptions from supply chain snarls and shortages, but analysts note that the sector faces challenges from lackluster demand.
The Institute for Supply Management said Tuesday that its manufacturing index dropped 0.7 points to 50.2 percent, barely higher than analysts expected and a touch above the 50-percent threshold indicating expansion.
“The US manufacturing sector continues to expand, but at the lowest rate since the coronavirus pandemic recovery began,” ISM manufacturing survey chair Timothy Fiore said in a statement.
With new orders softening over the past five months, the October results show companies preparing for lower demand in the future, he added.
Some respondents said the growing threat of a recession was making many customers slow orders “substantially” according to the report.
The new orders index remained in contraction while inventories stayed at a low level as well, data showed.
The prices index dropped for a seventh straight month, falling into contraction, an encouraging sign for buyers, said the report.
“The prices index indicated decreasing prices for the first time since May 2020,” said Fiore.
While customers are canceling some orders, a chemical products firm said in the survey that there are expectations of “some bounce back” as customers may be waiting for commodity prices to drop further.
But recession jitters among manufacturers “won’t disappear any time soon,” warned economist Oren Klachkin of Oxford Economics.
“Looking ahead, manufacturing will endure more pain as demand weakens at home and abroad while prices stay high and interest rates remain fairly elevated,” he added in an analysis.
Inflation will not “fall back to pre-Covid levels in the near term” either, he said.
US central bankers are due to start their two-day policy meeting on Tuesday, at the end of which analysts expect a further interest rate hike.