What does ISM data tell about US economy?

ISM Manufacturing Index dropped during September more than expected to the lowest level in two years. According to analysts, key measures point to slowing economic activity, but it inventories that hold the key to understanding what is happening in the US economy.

Companies seem tired of having input prices that impact profits, but business and companies are also suspicious about procuring supplies difficulties. In an effort to mitigate both of these risks, they are keen on making sure to hold inventories.

Employment dropped 5.5 points to fall back into contraction territory, though with respondent comments still focused on tight labor market conditions, analysts still suspect this remains a supply problem rather than a demand one.

Tired of having input prices that impact profits but also leery of procuring hard-to-get supplies, firms are now trying to mitigate both risks by making sure someone else in their supply chain is holding the inventories.
Supply and inventory issues normally direct manufacturing activity for some time. To the extent supply issues continue to ease, production held up in September but only modestly so. At 50.6, the production index remained dangerously close to the 50-line distinguishing expansion from contraction.