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U.S. Manufacturing Activity Stalls in November

Posted by IndustryNet on Monday, December 2, 2019

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U.S. manufacturing activity was little changed in November and remains mired in contraction territory, according to the Institute for Supply Management’s November survey of manufacturing executives.

The ISM’s report, released Monday, December 2nd, finds last month’s gauge of U.S. manufacturing activity barely budged, edging down 0.2% in November to a current reading of 48.1%.

Since August 2019, the ISM’s reading on manufacturing activity in the U.S. has been hovering below the 50% mark that is indicative of contraction. The report is in keeping with recent economic data released last month, including the Federal Reserve’s industrial output report, which found manufacturing production declined in October.

New orders, production and employment continue to contract, according to the ISM. Both imports and exports are in contraction as is the index for raw materials inventories and customer inventories.

Said Timothy Fiore, Chairman of the ISM: “Comments from the panel were consistent with the previous month, with sentiment improving compared to October. November was the fourth consecutive month of PMI contraction, at a faster rate compared to the prior month.”

Responses from the ISM’s November survey are little changed from the previous month, with concerns over tariff confusion and economic uncertainty weighing heavily on industrial executives.

“Global trade remains the most significant cross-industry issue,” continues Fiore. He noted that supply chains are meeting demand but that companies appear to be less condiment that “materials received will be consumed in a reasonable time period.”

Of eighteen industries, just five reported growth in November. Contraction was sharpest in wood products; printing & related support activities; furniture & related products; textile mills; and fabricated metals.”

What U.S. Manufacturers are Saying:

The ISM’s report included several responses from manufacturing executives in a wide range of industries, with many expressing cautious optimism as they adjust to a new reality of uncertainty and shifts in global demand.

Said one respondent in the transportation equipment industry: “Economic uncertainty continues. Our outlook on future business is cautious, yet positive.”

Another in the machinery sector stated: “Demand has stabilized for the last half of [the fourth quarter], and production will be stable for the rest of this year.”

Related: What U.S. Manufacturers Were Saying About Tariffs in 1930

Said another in the plastics industry: “Heading into the holiday season, we are seeing the backlog decrease as new orders for 2020 seem lighter than in past years.”

“Economy is holding up. Business is staying constant,” said an executive in the food processing sector. “The same challenges persist – foreign exchange, trade uncertainty and trend changes [for example, sugar reduction].”

New Orders Sink in November

The ISM’s New Orders Index lost 1.9 percentage points in November, falling to 47.2%. November marks the fourth consecutive month of contraction for the index, though last month saw an improvement in new orders.

Only five of eighteen industries reported growth in new orders, led by apparel, leather & allied products; and electrical equipment, appliances & components.

Declines were led by wood products; textile mills and printing; related support activities. 

Manufacturing Production Rebounds

The ISM’s Production Index bounced back from last month, though the reading is still technically in contraction. Manufacturing production rose 2.9% in November to a current reading of 49.1%.

Industries that reported higher levels of production included apparel, leather & allied products; paper products and food, beverage, and tobacco products.

Employment Index Sinks

Manufacturing employment moved into its fourth straight month of contraction in November, with that reading falling 1.1% to a current level of 46.6%.

Five of eighteen industries reported an increase in hiring for November, with paper products; plastics & rubber products; and food, beverage & tobacco products leading hiring gains.

These were offset by losses in wood products; printing & related support activities. 

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