ISM Shows Manufacturing Contraction for November

Manufacturing took it on the chin in November. That is at least a part of what the Institute for Supply Management has signaled in its manufacturing report. The headline index reading was 48.6, below the 50.0 break-even between growth and contraction.

Bloomberg was calling for a consensus estimate of 50.5, in a range of 49.7 to 51.0 from the pool of Econoday estimates. In short, this was not only a report measuring contraction, it was also more than a full point under the lowest economist’s prediction for November.

October’s report was 50.1 by comparison. Again, a reading above 50.0 suggests growth while one under 50.0 implies contraction. New orders were registered at 48.9 (down 4.0 points) and production was 49.2 (down 3.7 points). The employment index rose 3.7 points to 51.3 and supplier deliveries rose 0.2 points to 50.6. More problems exist on pricing, with prices falling 3.5 points to 35.5.

Low commodity prices, weak demand, sluggish overseas and mixed internals on pricing and expectations all culminated to make the contraction in November. The summary of the report indicated the following: New orders and production are contracting; employment is still growing; supplier deliveries are slowing; and inventories are contracting.

Of the 18 manufacturing industries, only five showed growth and 10 industries reported contraction in November. Tuesday’s ISM report on Manufacturing said:

The November PMI registered 48.6 percent, a decrease of 1.5 percentage points from the October reading of 50.1 percent. The New Orders Index registered 48.9 percent, a decrease of 4 percentage points from the reading of 52.9 percent in October. The Production Index registered 49.2 percent, 3.7 percentage points below the October reading of 52.9 percent. The Employment Index registered 51.3 percent, 3.7 percentage points above the October reading of 47.6 percent. The Prices Index registered 35.5 percent, a decrease of 3.5 percentage points from the October reading of 39 percent, indicating lower raw materials prices for the 13th consecutive month. The New Export Orders Index registered 47.5 percent, unchanged from October, and the Imports Index registered 49 percent, up 2 percentage points from the October reading of 47 percent. Ten out of 18 manufacturing industries reported contraction in November, with lower new orders, production and raw materials inventories accounting for the overall softness in November.

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