Although U.S. manufacturing continued to grow through September, the pace of expansion slowed, resuming a broader downward trend that has raised concerns over the long-term sustainability of the industry’s recovery.

After accelerating slightly in August, manufacturing in the United States slowed its rate of growth in September, continuing the slackening pace of expansion seen in July and June. As growth in new orders and employment continue to decline, concerns are escalating over whether the manufacturing sector will be able to regain some of its lost momentum through the rest of the year.

According to the Institute for Supply Management’s latest manufacturing Report on Business, released Friday, the nation’s manufacturing industry grew for the 14th consecutive month in September, as did the overall U.S. economy, which expanded for the 17th month straight.

The ISM’s purchasing managers’ index (PMI), a monthly gauge of the factory sector, reached 54.4 in September, down from the 56.3 reading in August. Readings above 50 indicate growth. The nearly two-point loss in the PMI shows that although manufacturing is still expanding, the rate of growth is slowing down month-to-month. The August PMI remained below the 12-month average of 56.7.

ISM’s new orders index also experienced a slowdown last month, decreasing from 53.1 in August to 51.1 in September. Meanwhile, monthly production fell from 59.9 to 56.5; employment fell from 60.4 to 56.5; and supplier deliveries dropped from 56.6 to 52.3. However, prices climbed rapidly in September, rising from 61.5 to 70.5.

“While the headline number shows relative strength this month…the overall picture is less encouraging,” according to Norbert J. Ore, chair of ISM’s Manufacturing Business Survey Committee. “Production is currently growing at a faster rate than new orders, but it typically lags and would be expected to weaken further in the fourth quarter. Manufacturing has enjoyed a stronger recovery than other sectors of the economy, but it appears that weaker growth is the expectation for the fourth quarter.”

The ISM report found that 13 of the 18 manufacturing industries tracked experienced growth last month: apparel and leather; fabricated metal products; electrical equipment, appliances and components; primary metals; miscellaneous manufacturing; transportation equipment; computer and electronic products; furniture and related products; plastics and rubber products; chemical products; paper products; machinery; and food, beverage and tobacco products.

Experts attribute the PMI’s September slowdown to the sluggish pace of new orders, which are a key indicator of future business activity, as well as to contracting company backlogs, which are used to gauge the short-term production outlook. The slowing pace of new orders and shrinking backlogs may inhibit manufacturing’s growth in coming months.

“Beginning last summer, factories revved up production because of strong demand from businesses that needed to replenish the stockpiles of goods that had dwindled during the financial crisis,” the Associated Press reports. “That trend has slowed in recent months.”

The deceleration in the growth rate has raised concerns over the sustainability of the manufacturing recovery and the negative effect a reverse in manufacturing could have on the general economy.

“After the worst recession since the 1930s, the economic recovery that began in June 2009 has been led by manufacturing as exports climbed, business investment improved and inventories were replenished,” Bloomberg News reports. “The rebuilding of stockpiles has since slowed.”

Broader economic challenges are also contributing to the slowdown in growth, particularly international trade and sluggish consumer spending activity that have driven down the rate of expansion for gross domestic product (GDP).

“All told, manufacturing will continue to be a growth leader for the struggling U.S. economy. But the slowing of U.S. GDP growth and the softening of global trade activity, both of which have been evident in recent months’ data, will clearly impact the thus far rapid rebound of the U.S. factory sector,” Cliff Waldman, economist for the Manufacturers Alliance/MAPI, said in an analysis of the ISM report. “And if the U.S. and global economies stall, manufacturing will be significantly impacted.”

Earlier

Manufacturing Growth Accelerates in August

Manufacturing Expands at Slower Pace in July

Manufacturing Grows for 11th Consecutive Month

Resources

September 2010 Manufacturing ISM Report on Business
Institute for Supply Management, Oct. 1, 2010

Manufacturing Activity Up for 14th Straight Month
by Tali Arbel
The Associated Press, Oct. 2, 2010

U.S. Economy: Manufacturing Points to ‘Modest’ Growth
by Bob Willis and Shobhana Chandra
Bloomberg News, Oct. 1, 2010

MAPI Analysis on ISM Index: Despite Softening, Growth in U.S. Factory Sector Continues
by Cliff Waldman
Manufacturers Alliance/MAPI, Oct. 1, 2010