Manufacturing output declined in November, falling below the baseline for growth, according to the most recent edition of the Manufacturing Report on Business issued today by the Institute for Supply Management (ISM).
The report’s key metric, the PMI, was 49.0 (a reading of 50 or higher indicates growth), down 1.2% from October’s 50.2, September’s 50.9 and back-to-back readings of 52.8 in July and August, with November’s contraction snapping a stretch of 29 consecutive months of growth.
While the PMI decreased, ISM reported the overall economy expanded for the 30th consecutive month, with the November PMI falling to its lowest level since May 2020’s 43.5 reading. The November PMI is 5.4% below the 12-month average of 54.4, with November’s 49.0 marking the lowest reading over that period and December 2021’s 58.8 marking the highest.
ISM reported that six manufacturing sectors grew in November, including Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Petroleum & Coal Products; and Transportation Equipment. And of the six biggest manufacturing industries, two— Petroleum & Coal Products; and Transportation Equipment—registered weak-to-moderate growth in November, according to ISM.
The report’s key metrics were largely down in November, including:
Comments submitted by the ISM member respondents highlighted various themes, with a central focus slowing economic momentum.
“Customer demand is softening, yet suppliers are maintaining high prices and record profits. Pushing for cost reductions based on market evidence has been surprisingly successful,” said a Computer & Electronic Products respondent.
A chemical products respondent observed that future volumes are on a downward trend for the next 60 days.
“The U.S. manufacturing sector dipped into contraction, with the Manufacturing PMI at its lowest level since the coronavirus pandemic recovery began,” wrote Tim Fiore, Chair of the ISM's Manufacturing Business Survey Committee, in the report. “With Business Survey Committee panelists reporting softening new order rates over the previous six months, the November composite index reading reflects companies’ preparing for future lower output. Demand eased, with the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index below 50 percent for a fourth consecutive month, (3) Customers’ Inventories Index effectively in ‘just right’ territory, climbing 7.1 percentage points, and (4) Backlog of Orders Index moving deeper into contraction. Output/Consumption (measured by the Production and Employment indexes) declined month over month, with a combined negative 2.4-percentage point impact on the Manufacturing PMI calculation. The Employment Index moved back into contraction, and the Production Index decreased but still remained in modest growth territory. Panelists’ companies confirm that they are continuing to manage head counts through a combination of hiring freezes, employee attrition, and now layoffs. Inputs—defined as supplier deliveries, inventories, prices and imports—mostly accommodated future demand growth. The Supplier Deliveries Index indicated faster deliveries, and the Inventories Index expanded at a slower rate as panelists’ companies continued to manage the total supply chain inventory. The Prices Index decreased for the ninth consecutive month, falling deeper into contraction territory.”