Manufacturing slowed in October

Nov. 3, 2006
Manufacturing activity continued to grow in October-- but at the slowest rate since June 2003, according to the Institute for Supply Management (ISM).

Manufacturing activity continued to grow in October-- but at the slowest rate since June 2003, according to the Institute for Supply Management (ISM).

The ISM report said that its manufacturing index was 51.2%, with any reading over 50% indicating growth. That marked a 1.7% drop from September. The pricing trend dropped sharply in October when the index fell 14% from September to 47%, which indicates lower prices. Manufacturers’ backlogs contracted for the second consecutive month.

In another significant shift, manufacturers believe that their customers have sufficient inventory on-hand for the first time in 64 consecutive months. If that’s indeed true, it would cut a steady tailwind for freight volumes as wholesalers, distributors and retailers have aggressively been trucking goods throughout the supply chain to replenish and build up inventories.

“There was significant movement in most of the indexes as new orders and production continued to soften, while backlogs contracted for a second month,” said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee. “There was particularly good news on the pricing front…[and]…the weaker dollar continues to support a strong export market.”

The manufacturing report follows a recent Dept. of Commerce report that shows the U.S. economy grew at a seasonally adjusted annualized rate of only 1.6% in the third quarter. Although 3Q was buoyed by solid 3.1% growth in consumer spending—which accounts for about 70% of the total economy—it was dragged by a 17.4% drop in residential investments. Capital expenditures continued to grow at a solid pace, up 6.4% compared with 2Q.

Although 3Q consumer spending was strong, in September there were signs that households were putting shopping sprees to rest. Disposable personal income increased 0.5% but consumer spending rose only 0.1%, a separate report from the Dept. of Commerce said.

For-hire truck tonnage in September rebounded at a seasonally adjusted 1.7% after falling 1.9% in August, the American Trucking Assns. (ATA) said.

“Even though truck tonnage improved in September, it’s easy to see that the pattern of starts and stops, which began in April, continued [in September],” said ATA chief economist Bob Costello. ATA described tonnage trends over the last two quarters as in a “seesaw pattern.”

“It’s no surprise that tonnage was off from September 2005, as the jump in hurricane-related freight last year is making year-over-year comparisons very difficult,” Costello added. “Hopefully, the recent drop in gasoline prices will result in a better-than-expected holiday sales season, and give a boost to truck volumes this year and early next year.”

To comment on this article, write to Terrence Nguyen at [email protected]

About the Author

Terrence Nguyen

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!

Sponsored Recommendations

Leveraging telematics to get the most from insurance

Fleet owners are quickly adopting telematics as part of their risk mitigation strategy. Here’s why.

Reliable EV Charging Solution for Last-Mile Delivery Fleets

Selecting the right EV charging infrastructure and the right partner to best solve your needs are critical. Learn which solution PepsiCo is choosing to power their fleet and help...

Overcoming Common Roadblocks Associated with Fleet Electrification at Scale

Fleets in the United States, are increasingly transitioning from internal combustion engine vehicles to electric vehicles. While this shift presents challenges, there are strategies...

Report: The 2024 State of Heavy-Duty Repair

From capitalizing on the latest revenue trends to implementing strategic financial planning—this report serves as a roadmap for navigating the challenges and opportunities of ...