US Manufacturing Sector Continued to Contract in November

According to the November ISM Manufacturing PMI report, economic activity in the manufacturing sector contracted in November for the ninth consecutive month, with respondents’ comments reflecting ongoing tariff-driven instability, cautious investment, and price increases. The overall Manufacturing PMI registered 48.2 percent in November, a 0.5-percentage-point decrease compared to October. Decreases in the Supplier Deliveries, New Orders, and Employment indexes were the primary contributors to the decline.

Continuing a recent trend, an improvement in one sub-index in the previous month had a rolling effect on a related sub-index in the subsequent month. For example, after New Orders strengthened in August, production improved in September, while an improvement in the Backlog of Orders Index in October transferred to the November Production Index. However, the New Orders and Employment indexes both dipped by 2 percentage points in November, underscoring ongoing economic uncertainty.

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 Backlog of Orders Index registered 44 percent, down 3.9 percentage points compared to October. The New Orders Index contracted for a third straight month in November, with the reading of 47.4 percent, 2 percentage points lower than in October. The New Export Orders Index reading of 46.2 percent was 1.7 percentage points higher than October. The Customers’ Inventories Index contracted at a slower rate.

Regarding output, the Production Index was up 3.2 percentage points, but employment contracted, down 2 percentage points relative to October, as two-thirds of panelists continued to indicate that managing head counts remains the norm as opposed to hiring.

Inputs (defined as Supplier Deliveries, Inventories, Prices, and Imports) were mixed. The Supplier Deliveries Index indicated faster delivery performance after three consecutive months (and 14 of the previous 16 months) in ‘slower’ territory. The Inventories Index registered 48.9 percent, up 3.1 percentage points compared to October’s reading. The Prices Index remained in expansion (or ‘increasing’ territory), registering 58.5 percent, up 0.5 percentage point compared to October. The Imports Index registered 48.9 percent, 3.5 percentage points higher than October’s reading.

Fifty-eight percent of the sector’s gross domestic product (GDP) contracted in November, matching the previous month’s figure, while the share of GDP in strong contraction decreased slightly, to 39 percent from 41 percent in October. 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 were: Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Machinery. The 11 industries reporting contraction in November—in the following order—were: 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; and Plastics & Rubber Products.

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