Manufacturing Firms Wait For Rate Cuts To Take Hold

Data from the manufacturing sector showed little improvement in September as firms wait for the effect of interest rate cuts to take hold.

Publish Date: Tuesday 1st October 2024
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Data from the manufacturing sector showed little improvement in September as firms wait for the effect of interest rate cuts to take hold.

The Institute of Supply Management (ISM) manufacturing Purchasing Managers’ Index (PMI), a survey of economic trends, was 47.2% in September, the same result as the prior month. (A reading below 50 indicates a contraction.) Inflation and the high interest rates used to fight price pressures have been a burden for manufacturers.

At the end of September, the Federal Reserve cut rates for the first time in four years, lowering its influential federal funds rate by a half-percentage point. September's data was gathered before the cut, and economists said the survey showed that purchasing managers were waiting to see the effects of lower interest rates.

“Demand remains subdued, as companies showed an unwillingness to invest in capital and inventory due to federal monetary policy—which the U.S. Federal Reserve addressed by the time of this report,” said Timothy Fiore, chair of the ISM manufacturing business survey committee.

Production and Prices Improve, But Employment Dips

The manufacturing survey showed some positive signals, with production improving and prices paid to suppliers falling to their lowest reading of the year.

At the same time, data showed a decline in employment, with only two of the 18 industries surveyed reporting growth. The data comes ahead of the Friday release of the September jobs report, the first since the Federal Reserve cut interest rates. Softness in the labor market helped push the Federal Reserve to cut the interest rate more than some economists expected.

December 22, 2024

Story attribution: Terry Lane
Investopedia

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