The Institute for Supply Management (ISM) had US Manufacturing Purchasing Managers’ Index (PMI) fall to 47.9, indicating contraction. In October, the PMI dropped to 48.7, below the market consensus of 49.5. This is down from September’s PMI reading of 49.1 and reflects continued contraction in the nation’s manufacturing sector. For context, the ISM Manufacturing PMI is one of the most important barometers of economic activity in our manufacturing sector. Recent numbers show that the industry is still experiencing challenges.
The drop in the PMI is in line with a larger trend of deteriorating economic conditions across the manufacturing industry. Just like PMI, any reading below 50 indicates contraction. At 48.7, the short-lived expansion has officially ended and economic activity is still declining. Analysts attribute many reasons, sheer logistical challenges across broken supply chains, inflation leading to less disposable income, and pandemic-driven shifts in consumer behavior, all driving forces to this deep downturn.
Despite these perplexing signals in manufacturing, the US Dollar Index made modest daily gains. As we went to press with this report, that index was at 99.85, +0.15% on the day. Investor sentiment has turned firmly in favor of safe-haven assets. Because it added to fears of slowing economic growth, this shift likely modestly raised the dollar’s value.
This difference between the falling ISM Manufacturing PMI and a rising US Dollar Index stresses an economic duality. These issues are compounding the crisis manufacturers already have been navigating. At the same time, investors are flocking to the dollar as the preferred safe haven asset amid economic uncertainty.