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U.S. Manufacturing Index Dips More Than Expected But Still Indicates Growth

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Activity in the U.S. manufacturing sector slowed by more than expected in the month of September but still saw continued growth, according to a report released by the Institute for Supply Management on Monday.

The ISM said its manufacturing PMI fell to 50.9 in September from 52.8 in August, although a reading above 50 still indicates growth in the sector. Economists had expected the index to edge down to 52.2.

With the bigger than expected decrease, the manufacturing PMI dropped to its lowest level since hitting 43.5 in May 2020.

The decline by the headline index was largely due to a downturn by new orders, as the new orders index slumped to 47.1 in September from 51.3 in August.

"Following four straight months of panelists' companies reporting softening new orders rates, the September index reading reflects companies adjusting to potential future lower demand," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

The employment index also slid to 48.7 in September from 54.2 in August, indicating a contraction in manufacturing employment following one month of growth.

On the other hand, the production index inched up to 50.6 in September from 50.4 in August, but only two of the top six industries - machinery and computer and electronic products - expanded.

"Materials availability and the labor pool continue to recover, but there is concern about demand beyond the near term," said Fiore.

The report also showed the prices index edged down to 51.7 in September from 52.5 in August, suggesting a slowdown in the pace of price growth.

On Wednesday, the ISM is scheduled to release a separate report on activity in the U.S. service sector in the month of September. The ISM's services PMI is expected to dip to 56.0 in September from 56.9 in August.

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