Trade group says nation’s manufacturing sector expands more slowly in September

first_imgNEW YORK – The nation’s manufacturing sector expanded at a slower-than-expected rate in September, suggesting there’s room for the Federal Reserve to consider another rate cut later this month. The Institute for Supply Management, a trade group based in Tempe, Ariz., said Monday that its manufacturing index registered 52.0 in September, down from 52.9 in August. It was the lowest reading since the gauge was at 50.9 last March. Analysts had expected a reading of at least 52.5. A reading of 50 or more indicates expansion, while below 50 indicates contraction. “Within manufacturing, the positives are aerospace, exports of things like electrical equipment and machinery, chemicals in general and for export,” he said. “On the negative side, autos are sluggish domestically, construction materials for the residential market are pretty weak, things like appliances and furniture are somewhat weak.” Still, he expects that the Fed will cut rates an additional quarter of a point later this month, if only to prevent weakness in housing from damaging the broader economy. “I think what they’re thinking these days is that the U.S. economy is fragile … and that it wouldn’t take much to throw us into recession,” he said. Gary R. Thayer, chief economist with A.G. Edwards & Sons Inc. in St. Louis, also predicts that the Fed will lower rates further. “I think the Fed is trying to be pre-emptive here and prevent the problems in housing from spreading,” he said, adding: “I still think they have more work to do.” In the latest ISM report, the index of new orders dropped to 53.4 in September from 55.3 the previous month, and the index of new export orders also declined to 54.5 in September from 57.0 in August. The production index, meanwhile, fell to 54.6 from 56.1. Still, the employment reading edged up to 51.7 last month from 51.3 in August. The inventory index dropped sharply, registering 41.6 in September, the lowest since January, after a reading of 45.4 in August. Norbert J. Ore, chairman of the institute’s survey committee, said in a statement that the manufacturing sector “is apparently in excellent shape with regard to inventories.” The report said 11 industries reported growth in September: petroleum and coal products; apparel and leather products; electrical equipment, appliances and components; food, beverage and tobacco products; paper products; nonmetallic mineral products; chemical products; plastics and rubber products; computer and electronic products; transportation equipment and miscellaneous manufacturing. 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! Optimistic that a rate cut is likely, investors pushed the Dow Jones industrial average up 148.59, or 1.07 percent, to 14,044.22 in afternoon trading. The blue-chip index surpassed its closing record of 14,000.41 set in mid-July, rising as high as 14,056.09. Broader market indexes also rose sharply. The Standard & Poor’s 500 index rose 15.25, or 1.00 percent, to 1,542.00; and the Nasdaq composite index rose 29.22, or 1.08 percent, to 2,730.72. Concerned about turbulence in credit markets and a plummeting housing market, the Federal Reserve on Sept. 18 cut key interest rates for the first time in four years, starting with an aggressive half-point move. Investors have since been monitoring economic indicators such as the ISM’s manufacturing report for clues whether the Fed will cut rates further when it meets Oct. 30-31. Thomas J. Duesterberg, president and chief executive officer of the Manufacturers Alliance/MAPI, which is based in Arlington, Va., said that the positives in the manufacturing sector so far outweigh the negatives. last_img

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