Economic activity in the manufacturing sector contracted in November for the ninth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, according to the Institute for Supply Management’s (ISM) Manufacturing PMI Report.
The report was issued by Susan Spence, chair of the ISM manufacturing business survey committee.
“The Manufacturing PMI registered 48.2% in November, a 0.5-percentage point decrease compared to the reading of 48.7% in October. The overall economy continued in expansion for the 67th month after one month of contraction in April 2020. (A Manufacturing PMI above 42.3%, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index contracted for a third straight month in November following one month of growth; the figure of 47.4% is 2 percentage points lower than the 49.4% recorded in October. The November reading of the Production Index (51.4%) is 3.2 percentage points higher than October’s figure of 48.2%. The Prices Index remained in expansion (or ‘increasing’ territory), registering 58.5%, up 0.5 percentage point compared to the reading of 58% reported in October. The Backlog of Orders Index registered 44%, down 3.9 percentage points compared to the 47.9% recorded in October. The Employment Index registered 44%, down 2 percentage points from October’s figure of 46%,” Spence said. “The Supplier Deliveries Index indicated faster delivery performance after three consecutive (and 14 of the previous 16) months in ‘slower’ territory. The reading of 49.3% is down 4.9 percentage points from the 54.2% recorded in October. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 48.9%, up 3.1 percentage points compared to October’s reading of 45.8%.”
Spence added, “The New Export Orders Index reading of 46.2% is 1.7 percentage points higher than the reading of 44.5% registered in October. The Imports Index registered 48.9%, 3.5 percentage points higher than October’s reading of 45.4%. In November, U.S. manufacturing activity contracted at a faster rate, with pullbacks in supplier deliveries, new orders and employment leading to the 0.5-percentage point decrease of the Manufacturing PMI. Continuing a recent trend, a previous month’s improvement in one index was evident in another gauge. After new orders strengthened in August, production improved in September. An improvement in the Backlog of Orders Index in October transferred to the Production Index, which expanded in November (as backlogs pulled back). However, the New Orders and Employment indexes both dipped 2 percentage points, underscoring the ongoing economic uncertainty.”
Spence continued, “Decreases in two of the four demand indicators (Backlog of Orders and New Orders) overwhelmed the gains posted by the New Export Orders and Customers’ Inventories indexes. The Customers’ Inventories Index contracted at a slower rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production. Regarding output, production jumped into expansion, but employment contracted at a faster pace, as 67% of panelists (the same as October) indicated that managing head counts is still the norm at their companies, as opposed to hiring.”
Spence concluded, “Finally, inputs (defined as supplier deliveries, inventories, prices and imports), were mixed, with the Supplier Deliveries Index indicating faster deliveries, the Inventories Index contracting at a slower rate, and the Prices Index continuing to reflect increases. The Imports Index contracted at a slower rate. Looking at the manufacturing economy, 58% of the sector’s gross domestic product (GDP) contracted in November, matching the previous month’s figure, and the percentage of GDP in strong contraction (registering a composite PMI of 45% or lower) decreased slightly, at 39% compared to 41% in October. The share of sector GDP with a PMI at or below 45% is a good metric to gauge overall manufacturing weakness. Of the six largest manufacturing industries, three (Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery) expanded in November.”
The four manufacturing industries reporting growth in November are:
- Computer & Electronic Products
- Food, Beverage & Tobacco Products
- Miscellaneous Manufacturing
- Machinery
The 11 industries reporting contraction in November — in the following order — are:
- Apparel, Leather & Allied Products
- Wood Products
- Paper Products
- Textile Mills
- Fabricated Metal Products
- Petroleum & Coal Products
- Chemical Products
- Nonmetallic Mineral Products
- Furniture & Related Products
- Transportation Equipment
- Plastics & Rubber Products
