MNI INTERVIEW: ISM's Fiore: PMI Contracts on Falling Optimism

By Brooke Migdon

     WASHINGTON (MNI) - Continued weakness in business confidence remains a

significant issue for U.S. manufacturers as activity, despite a moderate uptick

in October, remains in contractionary territory, Institute for Supply Management

economist Tim Fiore told MNI Friday.

     According to Fiore, global trade remains the most significant

"cross-industry issue" and overall business sentiment is "cautious" regarding

near-term growth expectations.

     The ISM Manufacturing PMI rose 0.5 percentage points to 48.3% in October

following September's 47.8% level, signalling the first sign of growth in three

months. But readings below 50 still signal declining activity.

     The new orders index rose 1.8 percentage points in October to 49.1% from a

47.3% reading in September, and the employment index increased by 1.4 points to

47.7%. But the production index declined by 1.1 points to 46.2%, down from

September's 47.3% level.

     Despite his concerns on tariffs, only 23% of survey respondents expressed

such concerns in October, down from 28% last month and at the lowest level since

March 2018 when Fiore began collecting the data.

     Fiore said President Donald Trump's administration doesn't seem to be using

tariffs as "weapons" as in months prior and doesn't expect manufacturing

activity to react to tariffs ahead of the planned December 15 tariffs on

consumer goods from China.

     But the effects of tariffs are far from negligible, and production managers

remain wary of invest too much into their businesses given the unpredictability

of the president and continued trade policy uncertainty.

     "Even if all the tariffs were lifted tomorrow, I don't think there's enough

confidence to invest in the sector," he said. "I think the manufacturing

community is pretty much frozen now until we know what the next administration

will look like."

     But Fiore said the Federal Reserve's rate cut on Wednesday should help

boost manufacturing activity as long as consumer confidence remains stable, with

increased car and new home sales expected to lead the PMI closer to positive

territory in the coming months.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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