Washington, DC, November 3--The Institute for Supply Management said its monthly index of manufacturing activity fell to 56.8 in October from 58.5 the month before.
It was the fourth decline in five months and placed the index at its lowest level in 13 months. Norbert Ore, a Georgia Pacific Corp. executive who oversees the survey, pointed to commodity costs as a "major" concern among survey participants.
The institute, a private nonprofit association, compiles the index by polling executives and managers at about 400 industrial companies every month and asking them about overall activity, orders, pricing, exports and other aspects of their businesses. It is closely watched in financial markets and in Washington because it has a long track record and is one of the first national indicators of economic activity out for the preceding month.
At 56.8, the manufacturing index was still higher than it was during most of the 1990s, a point that leads many economists to believe the manufacturing recovery itself isn't likely to be derailed. Moreover, there were some distinct bright spots in the report. An index for new orders inched up to 58.3 from 58.1 the month before. Export orders also were higher. Nevertheless, the downdraft in the overall index suggests the outlook for manufacturing growth and profits has softened.
"The pall of rising commodity prices is having a serious impact on markets and pricing," one electronics-industry executive wrote to the group, adding that "2005 operating plans are being scaled back." Mr. Ore said the electronics sector has seen a big slowdown in recent months, though the sector is still expanding. In all, companies in 15 of 20 industries were expanding in October.
