U.S. Manufacturing Index Rises to 55.5 in October as Oil Falls 7.6%

Key Facts

The Institute for Supply Management’s U.S. manufacturing activity index rose to 55.5 points in October, from 54.5 in September, exceeding economists’ forecasts, according to a Reuters poll, for it to hold at 54.5. The reading showed industrial activity expanding as oil prices fell amid growing hopes of easing supply disruptions linked to the war with Iran. In markets, Brent crude fell 7.6% to $104.77 a barrel on November 2. Reuters attributed the strength in factory activity to robust consumer spending and business spending on artificial intelligence. But the survey also showed input costs remaining elevated and manufacturers’ sentiment weakening.

Reuters said the measure of prices factories pay for inputs fell to 75.2 points in October, from 77.9 in September, but remained elevated. The reading comes amid broader inflation; the U.S. personal consumption expenditures price index rose 3.6% year over year in September. The Federal Reserve kept its benchmark overnight interest rate in a range of 3.75% to 4.00% the previous week. That means the decline in the input price measure did not end concerns about price pressures. At the same time, the survey continued to reflect weak sentiment among manufacturers despite the improvement in the activity index.

The decline in oil had a mixed effect on U.S. stock indexes in the November 2 session. The S&P 500 ended down 0.5% after erasing gains of 1.1% earlier in the session. The Dow Jones rose 0.4%, while the Nasdaq lost 1.1%. The Associated Press linked market moves to Brent’s decline, which brought it to $104.77 a barrel. The price range highlights the scale of volatility since before the outbreak of the war with Iran, with the most-active Brent contract moving between about $70 and $120 a barrel.

Oil’s decline came amid diplomatic efforts that had yet to produce an announced agreement. The Associated Press said Qatari mediators held two rounds of talks with Iranian officials the previous week, with further rounds planned during the week of November 2. The mediators worked on a framework linking Iran halting its attacks in the Strait of Hormuz with the United States lifting its blockade of Iranian ports. The agency quoted officials as saying the efforts had made progress, without that amounting to a final breakthrough. China’s Foreign Ministry also said Beijing would send a special envoy to Iran, Oman and Saudi Arabia in early and mid-November, while U.S. Secretary of State Marco Rubio said the administration preferred a diplomatic solution and that talks were continuing.

Upcoming economic data releases include the September report on factory shipments, inventories and orders, which the U.S. Census Bureau is scheduled to publish on November 3 at 10:00 a.m. The Labor Department scheduled the October Job Openings and Labor Turnover report for publication on December 1 at 10:00 a.m. The U.S. October jobs report is due on November 6, according to the Bureau of Labor Statistics’ schedule. These successive releases provide further indicators of industrial activity and the labor market after the manufacturing reading showed expansion in October. The course of talks concerning the Strait of Hormuz remains a factor in monitoring oil prices over the same period.