What stands out here is that the drop in September was the fifth contraction report (under 50.0) this year. It also comes during downgrades to global economic growth and intense financial market volatility. September’s decline followed two months of moderate expansion, and the speed of September’s descent was listed as a source of concern.
Just under 30% of the panel said China’s economic woes had a greater impact on them than the problems faced by the European Union. Just under 20% of respondents cited the EU as having a greater impact. Nearly 30% of the panel said that neither the EU nor China have significantly affected business.
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Not all components of the index were in the red. Three of the five were in contraction, while employment and supplier deliveries were both above the 50 neutral level. Component indications were as follows:
- Production led the decline with a sharp double-digit drop that placed it at the lowest since July 2009.
- New orders also fell significantly and both key activity measures are running well below their historical averages.
- Order backlogs remained in contraction for the eighth consecutive month.
- The sharp rise in stock growth seen in August was not repeated, with inventories falling back closer in line with the long-run average.
- In contrast employment, which tends to lag orders, rose for the third month in a row, although the majority saw staffing levels unchanged.
- Supplier deliveries remained broadly unchanged.
A quote from the MNI report said:
While activity between the second quarter and third quarter actually picked up, the scale of the downturn in September following the recent global financial fallout is concerning. Disinflationary pressures intensified and output was down very sharply. We await the October data to better judge whether this was a knee jerk reaction and there is a bounceback, or whether it represents a more fundamental slowdown.
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