After months of supply chain constraints and historic demand, the U.S. manufacturing climate is shifting once again. Get the latest data on manufacturing output and capacity utilization, prices, optimism, and regional performance in our key takeaways from December’s most critical manufacturing business reports.
Executive Summary
• Following a two-and-a-half-year expansion, U.S. manufacturing activity dipped into contraction for the first time since the pandemic.
• Manufacturing output and capacity utilization declined slightly in November, though capacity utilization continues to hover above its long-run average.
• The U.S. wood products sector led output and capacity utilization gains in November, while the aerospace industry was a clear year-over-year winner.
• Supplier deliveries and prices continued to improve, while benchmark data released on container rates find global shipping costs are down 77% over this time last year.
• The number of unfilled manufacturing jobs eased to 759,000, while manufacturers hired at a slower rate in November.
• Regional manufacturing surveys continue to show slowing manufacturing activity, with multiple indices falling into contraction. However, the New York region posted a strong reading for future business conditions and capital expenditures.
Manufacturing Output, Capacity Eases
U.S. manufacturing production declined 0.6% in November, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released December 16th. Meanwhile, the index for mining declined 0.7%, while the utilities index rose 3.6%. The Fed’s overall industrial output index decreased 0.2% last month.
Manufacturing capacity utilization also declined in November, down 0.6% to a reading of 78.9%. Despite the drop, capacity utilization for manufacturing is 0.7% above its long-run average.
Manufacturing sectors that saw the sharpest increase in capacity utilization in November included wood products and printing/related support activities. Decreases in capacity utilization were seen in both durable and non-durable goods sectors, and were sharpest in electrical equipment, motor vehicles and parts, and paper products.
In terms of output, most industrial sectors saw production decreases over the month, with the exception of wood products, which rose by 3.6%; printing and related support activities, which rose 1.6%; and aerospace and miscellaneous transportation equipment, which increased 1.1%.
Notably, aerospace and miscellaneous transportation equipment was the clear winner for year-over-year output gains, up 10.2% from this time last year.
November’s output losses were strongest in motor vehicles & parts, which sank 2.8%; electrical equipment, which fell 2.4%; and furniture, which declined 2%. All other U.S. manufacturing sectors saw marginal declines in production last month.
Hiring in Manufacturing Decelerates; Unfilled Positions Decline
U.S. manufacturers added jobs at a slower rate in November, according to the Labor Department’s monthly report. The sector added 14,000 jobs in November, roughly half of the number of jobs added in October.
Read more: Hiring Trends in U.S. Manufacturing
In November, employment gains were strongest in transportation equipment (+6,100 jobs), machinery (+3,900); and computer and electronic products (+3,900).
Gains were offset by losses in plastics/rubber products (-3,200), as well as electrical equipment and appliances (-2,400), as well as paper products (-700).
Meanwhile, according to the latest JOLTS (Job Openings and Labor Turnover Survey) reported November 30th the number of unfilled job openings in the sector has come down, month-over-month, but still remains elevated, at 759,000 open positions.
Container Rates Fall Further
In November, the Drewey Composite World Container Index, a benchmark for shipping container prices, found that shipping costs have dropped considerably, with prices down 77% over last November, continuing a downward trend seen for the 42nd consecutive week. Prices hit an all-time high during the pandemic and are still elevated above the pre-pandemic mark.
Manufacturing Activity Falls into Contraction for First Time Since Pandemic
Meanwhile, U.S. manufacturing activity’s two-and-a-half years of expansion came to an end in November, when the sector slipped into contraction, according to the latest survey by the Institute for Supply Management released December 1st. Activity eased 1.2% in November to a reading of 49%, crossing the divide that separates expansion from contraction.
Demand remained soft in November, with the New Orders index in contraction at 47.2%. Employment also contracted, declining to 48.4%, while production remained in expansion at 51.5%.
On the bright side, both prices and supplier deliveries continued to improve in November, with the ISM’s Supplier Delivery Index posting its best reading since February 2012 at 46.8% and prices falling another 3.6% to a reading of 43%.
Just six of eighteen industries surveyed by the ISM reported growth in November, led by apparel, leather and allied products, nonmetallic mineral products, primary metals, miscellaneous manufacturing, and petroleum/coal products.
Comments from manufacturers revealed ongoing concerns over a possible recession, softening demand, and lingering supply chain issues.
One respondent in the machinery sector reported, “General economic uncertainty has created a slowdown in orders as we approach the end of the year, and many of our key customers are reducing their capital expenditures spend.”
Related: Selling in a Downturn: Opportunities & Best Practices
Regional Surveys Reveal Subdued Manufacturing Activity
Empire State Manufacturing Survey After climbing back from contraction in October, Manufacturing activity in the New York region declined in November. The results of the latest Empire State Manufacturing Survey, finds the general business conditions index for manufacturers in the region declined 16 points, falling into contraction with a reading of -11.2%.
The report found new orders declined slightly, while both employment and shipments improved modestly.
Notably, the index for future business conditions rose 12 points to a reading of 6.3%, while the survey’s capital spending index rose nine points to a reading of 23.4%, suggesting modest optimism amongst industrial executives in the region.
Richmond Fed Manufacturing Survey Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, reported weaker manufacturing activity for the region. The survey’s composite manufacturing index remained stuck in contraction in November, with a reading of -9.
The survey’s readings revealed demand had improved slightly in November, but is still in contraction, with volume of new orders coming in at -14, compared to October’s reading of -22. Meanwhile, the indexes for employment and shipments fell slightly in November.
Texas Manufacturing Outlook Survey Meanwhile, Texas manufacturing activity continued to expand at a slower rate in November, with the production index skirting contraction, falling five points to near zero.
Meanwhile, new orders plummeted to a reading of -20.9, while capacity utilization declined fell into contraction with a reading of -3.4, while the employment index fell to its lowest since mid-2020.
The survey’s general business activity index posted its seventh consecutive negative reading, coming in at -14.4, while the company outlook index fell further to a reading of -15.2 from -9.1 last month.
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