U.S. PMI drops to 52.8 in September from 53.1 in August

The flash PMI (Purchasing Manager’s Index) for U.S. manufacturing has declined to a three-month low in September – down to 52.8. The average PMI for the quarter has been 53.2.

Anything above the 50-mark indicates expansion.

One of the main reasons that PMI growth has slowed down is because domestic demand is weaker than it was at the beginning of the year.

In addition, export demand has declined slightly for the first time in three months during September.

As a result, the total inflows of new orders increased at the slowest rate for five months.

Manufacturers are also less willing to take on more staff. The employment signaled by the September PMI was the worst since December 2010.

This suggests that the 14,000 rise in manufacturing payrolls in August was just a rarity. A more representative indication is the 39,000 drop in payroll figures seen over the prior five months.

The report said:

“Manufacturers took a cautious approach to hiring in September, with the rate of job creation the weakest in the current three-month sequence. Although some firms hired additional staff in response to greater activity, others reduced their workforces in a bid to cut overheads.”

The Federal Reserve surprise

Everyone was surprised when the Fed decided to continue its $85bn monthly stimulus program. A statement made by the Fed said that the current economic growth was only moderate, noting that with increasing mortgage rates rises and tightening of financial conditions in recent months the economy and labor market may slow down.

“The Committee sees the improvement in economic activity and labour market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases.”