The S&P PMI manufacturing index fell to 47.3 in September, 0.6 points less than August (47.9) and 0.3 points above the mid-month flash estimate (47.0). This is the third consecutive month of a sub-50 score. This indicates the continued contraction of the manufacturing economy.

This contraction is partly due to a sharp decline in both new orders and output alongside weakening demand and political uncertainty. Firms also reduced employment for the second consecutive month with employment decreasing at the strongest pace since the start of 2010, excluding the the COVID-19 pandemic period.

Manufacturers continued to face rising input prices. The higher cost of raw materials such as cardboard and paper led to higher shipping rates. The rate of inflation, however, eased slightly compared to the previous month.

In contrast, the rate of output price inflation quickened, reaching the highest since April this year.

The report suggests that optimism is still high with firms hoping new business will pick up following the Presidential Election. Lower interest rates also supported confidence, since it ticked up to a four-month high but remained slightly weaker than the series trend.

No revision is expected to the flash estimate.

Based on monthly questionnaire surveys of selected companies, the Purchasing Managers' Manufacturing Index (PMI) offers an advance indication on month-to-month activity in the private sector economy by tracking changes in variables such as production, new orders, stock levels, employment and prices across manufacturing industries. The final index for the current month is released roughly a week after the flash.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the Markit PMIs in the U.S. and elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

Markit originally began collecting monthly Purchasing Managers' Index (PMI) data in the U.S. in April 2004, initially from a panel of manufacturers in the U.S. electronics goods producing sector. In May 2007, Markit's U.S. PMI research was extended out to cover producers of metal goods. In October 2009, Markit's U.S. Manufacturing PMI survey panel was extended further to cover all areas of U.S. manufacturing activity. Back data for Markit's U.S. Manufacturing PMI between May 2007 and September 2009 are an aggregation of data collected from producers of electronic goods and metal goods producers, while data from October 2009 are based on data collected from a panel representing the entire U.S. manufacturing economy. Markit's total U.S. Manufacturing PMI survey panel comprises over 600 companies.