US manufacturing activity shrank in September for a sixth month, reflecting weak orders and declining employment.

The Institute for Supply Management’s (ISM) factory gauge held at 47.2, data out on Tuesday showed, extending a period of persistent softness. A reading below 50 indicates contraction.

The rates of decline for the group’s measures of orders and output eased up from the prior month, but remained in contraction territory. Bookings shrank for a sixth month, keeping production constrained and pushing down the ISM’s employment index.

Subdued demand, including from overseas customers, helped reduce price pressures on materials and inputs. The prices-paid index fell 5.7 points — the most since May 2023 — to 48.3, the first time this year that the gauge has indicated decreasing overall costs.

Cheaper input materials, such as oil, can help lead to further declines in prices for finished goods as well as restrain services inflation. That would keep Federal Reserve policymakers on track to continue lowering interest rates to guard against any deterioration in the labour market.

The survey was conducted prior to a strike at East and Gulf coast ports that risks pushing up shipping costs and import prices. The work stoppage affects 36 ports that have a combined capacity to handle as much as half of all US trade volumes, and the closures immediately halt container operations and auto shipments.

The ISM manufacturing employment index dropped to 43.9 in September, marking a fourth month of contraction. The Bureau of Labor Statistics will issue its latest employment report on Friday, and economists expect another decline in factory payrolls.

Limited capital spending, owed in part to high borrowing costs and uncertainty surrounding the November presidential election, remains a headwind for manufacturing. Moreover, export markets are fragile. The ISM index of export orders declined last month, and showed the steepest pace of contraction since January.

The ISM report also showed inventories shrank at the fastest pace this year, suggesting producers are keeping stockpiles lean. 

  - Bloomberg