US factory output rises in September, but third-quarter momentum fades

US manufacturing output increased in September, but production lost considerable momentum over the third quarter; the monthly gain does not establish a stronger quarterly trend.^[1]

The Middle East conflict has disrupted supply chains and raised energy prices, creating headwinds for factories.^[1]

Supply disruptions can make it harder for manufacturers to obtain materials and components on time, while higher energy prices increase the cost of running factories and moving goods.^[1]

Those pressures can constrain output and squeeze margins at the same time: manufacturers must absorb added costs unless they can pass them to customers through higher prices. September’s production increase alone does not show that these pressures have eased.^[1]

Impact

• US manufacturingRisk

  Manufacturers face disrupted supplies and higher energy costs, forcing a choice between absorbing costs and raising customer prices. Businesses with greater energy needs or more exposure to disrupted supply chains are more vulnerable.^[1]

What to watch next

• The October 23 release of S&P Global’s October manufacturing Purchasing Managers’ Index (PMI) will test whether factory activity continues to lose momentum. The estimate is 55.0, versus 55.9 previously; readings above 50 indicate expansion.