A private measure of the manufacturing sector grew for a second straight month in September, but at a slower pace than in August, another sign pointing to a bumpy economic recovery.
The Institute for Supply Management, a trade group of purchasing executives, said Thursday that its index measuring the industrial sector read 52.6 last month. The survey came in at 52.9 in August — the first time it was above 50, indicating expansion, since January 2008.
While showing growth, analysts polled by Thomson Reuters had expected a stronger reading of 54.
Of the 18 industries surveyed, 13 reported growth last month.
New customer orders, a gauge of future production, posted a 60.8 last month. That followed a reading of 64.9 in August, the highest since December 2004. Production growth also slowed to 55.7, from 61.9 in August.
"Manufacturing is continuing to come back," said Joel Naroff of Naroff Economic Advisors. Since customer orders and companies' backlogs are still growing, production should rise, he said.
But Naroff does not expect manufacturers to start hiring anytime soon. ISM's employment index dipped in September to 46.2 from 46.4, the 14th straight month of contraction.
"Firms are leaning on productivity gains rather than hiring new workers," said Naroff, who doesn't expect any job gains in the U.S. before spring. In the industrial sector, companies may be even more cautious to hire since they can just put their hourly employees on overtime, he added.
The general tone of the ISM members surveyed is still "somewhat negative," said Norbert Ore, chair of the manufacturing report. Still, he expects continued moderate growth for the rest of this year as customers restock inventories.
Businesses slashed spending on inventories at a record pace of $160.2 billion in the second quarter. That means industrial companies will have to boost production, even if just to restore customers' depleted stocks.
The economy as measured by gross domestic product fell at a pace of 0.7 percent in the second quarter. But GDP likely grew at a healthy pace of 4.6 percent in the July-September period as that restocking occurred, before slowing to a pace of 2.6 percent in the current quarter and 2 percent through 2011, Naroff said.