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Manufacturing Expands in September, ISM Says, But 'Overall Picture Less Encouraging'

In its latest installation of the Report on Business, the Institute for Supply Management finds that economic activity in the manufacturing sector grew in September for the 14th consecutive month, and that the overall economy grew for the 17th executive month. PMI was measured at 54.4 percent for the month of September.

"While the headline number shows relative strength this month as the PMI reading of 54.4 percent is still quite positive, the overall picture is less encouraging," said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The growth of new orders continued to slow, as the index is down significantly from its cyclical high of 65.9 percent (January 2010). Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter. Both the Inventories and Backlog of Orders Indexes are sending strong negative signals of weakening performance in the sector."

Thirteen of 18 manufacturing industries studied reported growth in September, including apparel, electrical equipment and appliances, transportation equipment, plastics and rubber, and food and beverage. The wood products, printing, and nonmetallic minerals sectors contracted.

Some survey respondents said regarding their industries:
• "Business continues flat relative to prior month and is expected to remain flat. Commodities continue to be the main concern heading into 2011." (Food, Beverage, and Tobacco Products)
• "Business results (top and bottom line) continue to meet or exceed our operating plan and exceed prior year performance by double digits." (Chemical Products)
• "Customers seem to be pulling back on orders. I suspect that they are trying to reduce their inventory for the approaching year-end." (Transportation Equipment)

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