(Bloomberg) -- A measure of US factory activity stumbled to a three-month low as sagging orders and scant production growth undercut hopes that manufacturing is turning the corner after an extended retreat.

The Institute for Supply Management’s manufacturing gauge fell 2.3 points, the biggest monthly decrease in more than a year, to 46.7. Readings below 50 indicate contraction, and the October index trailed all estimates in a Bloomberg survey of economists.

While the pullback likely reflected the impact of a strike at the nation’s automakers that idled many vehicle plants, 13 industries reported contracting activity and just two indicated growth.

“Demand remains soft, but production execution is stable compared to September as panelists’ companies continue to manage outputs, material inputs and — more aggressively — labor costs,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.

The October decline wiped out much of the progress in the prior three months, leaving the ISM index close to its lowest level since the aftermath of the pandemic. The gauge may well snap back after labor deals were reached between the United Auto Workers union and Big Three automakers.

The group’s orders index dropped to a five-month low of 45.5 in October, indicating demand is shrinking at a faster pace, Wednesday’s report showed. The ISM production gauge moved closer to stagnation.

A measure of factory payrolls slipped back into contraction territory to the lowest level in three months.

Select ISM Industry Comments

“Economy absolutely slowing down. Less optimism regarding the first quarter of 2024.” — Chemical Products

“Backlog is starting to dip a bit. We’re hearing of cutbacks in 2024 ordering, but it’s still very strong compared to historical averages.” — Transportation Equipment

“Markets appear to have slightly slowed. Certain commodities remain high.” — Food, Beverage & Tobacco Products

“Seeing a slowdown on bookings, and our backlog is down to five days from 15 weeks earlier this year.” — Machinery

“A slow fourth quarter, and we’re clearly in a mild industry recession. However, demand is down less than 5 percent, and customer confidence of a recovery in the second half of 2024 is solid.” — Fabricated Metals

“Business is decent — not great, but steady and solid.” — Furniture

“Demand for raw materials/chemicals appears to be stable heading into the fourth quarter.” — Petroleum Products

“Despite the ongoing United Auto Workers (UAW) strike, there’s a firmness and pickup in orders for the rest of the fourth quarter.” — Primary Metals

Inventories shrank at the fastest pace since June 2012. That measure may also have been affected by the walkout as the production slowdown forced automakers to sell existing stock.

The ISM report also showed prices paid for materials shrank at a slower pace, suggesting some stabilization in input costs.

What Bloomberg Economics Says...

“A pullback in demand in October helped push manufacturing activity deeper into contraction... Firms will struggle to pass along cost pressures because demand has weakened and consumers have grown more sensitive to prices.”

— Eliza Winger. To read the full note, click here

--With assistance from Kristy Scheuble.

(Adds graphic and industry comments)

©2023 Bloomberg L.P.