–ISM Manufacturing Index at 48.4 vs. 46.5 in October, Well above Median Forecast of 47.6
–ISM’s Fiore: Concerns about Inflationary Fiscal Policy Not Going Away but Optimism over Trump Plans Kicks in
–ISM’s Fiore: US Economy on Soft-Landing Course; Still Believes ISM Index Likely to Pick Up Above Neutral Line of 50 in Q1 of 2025
By Max Sato
(MaceNews) – U.S. manufacturing activity was in contraction for an eighth straight month in November as firms remained reluctant to invest amid uncertainties over President-elect Donald Trump’s tariff threats on America’s close trading partners but the pace of decline eased slightly on optimism that a Republican administration will be business friendly, the latest monthly data from the Institute for Supply Management showed Monday.
The sector index compiled by the ISM, which indicates general direction, rose 1.9 percentage points to a five-month high of 48.4 in November after unexpectedly slipping to 46.5 in October from 47.2 recorded in both September and August. The latest reading came in well above the median economist forecast of 47.6.
“Demand remains weak, as companies prepare plans for 2025 with the benefit of the election cycle ending,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement, repeating similar comments he had made previously. “Production execution eased in November, consistent with demand sluggishness and weak backlogs. Suppliers continue to have capacity, with lead times improving but some product shortages reappearing.”
“New order rates expanded only marginally as backlog levels continued to decline, causing manufacturers to reduce output to close the calendar year,” Fiore said. But he also pointed to a silver lining in the November report that “companies are showing signs of willingness to invest in inventory, a marked departure from the last two years of activity.”
Concern over a possible inflationary policy stance under the Trump administration is “not going away” but firms are looking at the positive side as Republicans tend to be “business friendly,” Fiore told reporters.
Asked about Canadian Prime Minister Justin Trudeau’s surprise visit with Trump and his incoming team over the weekend, Fiore said, “We’ve seen this (diplomatic) style before. Hopefully it works (to defuse trade friction).” Trump said last week that he would impose a 25% tariff on all goods from Mexico and Canada as soon as he takes office on Jan. 20, and that he would also slap an additional 10% tariff on imports from China, all part of his drive to crack down on illegal drugs and immigration.
Fiore told reporters that he still believes the ISM manufacturing PMI will pop above the crucial 50 mark in the January-March quarter of 2025 in what he describes as a long overdue recovery from the post-pandemic slowdown that was caused by heightened geopolitical risks and uncertainties over the U.S. fiscal and monetary policy trajectories.
Fiore repeated that the U.S. manufacturing sector is away from a serious downturn and that the November ISM report supports the path toward soft-landing amid signs of slowing but resilient employment and consumption.
The ISM index has averaged 47.4 in the latest 25-month period (from October 2022, when the index slipped to the neutral line of 50 from 50.8 the previous month), compared to 44.2 during the 18-month Great Recession that spanned from February 2028 (48.8) until July 2009 (49.7). This is the longest sectorial recession since the 25-month downturn that lasted from May 1989 (49.3) until May 1991 (44.5), ISM data shows.
Among the five subindexes that directly factor into the manufacturing PMI, the new orders index expanded in November after seven consecutive months in contraction, registering 50.4, an increase of 3.3 points compared to October’s figure of 47.1. However, it still hasn’t indicated consistent growth since a 24-month streak of expansion ended in May 2022.
The production index continued in contraction territory in November, hovering at 46.8, which was just 0.6 point above 46.2 in October. The index rose to 49.8 in September from 44.8 in August, which was the lowest since 34.2 in May 2020, when world demand plunged at the initial phase of the pandemic.
The employment index stood at a five-month high of 48.1 in November, up 3.7 points from 44.4 in October. Of the six big manufacturing sectors, only one (food, beverage & tobacco products) expanded employment. “Respondents’ companies are continuing to reduce head counts through layoffs, attrition and hiring freezes,” Fiore said. “This sentiment was supported in November by the approximately 1-to-1.5 ratio of hiring versus staff reduction comments, compared to a 1-to-3 ratio the previous month, meaning less workforce reduction activity.”
Delivery performance of suppliers to manufacturing organizations was faster in November, with the supplier deliveries index registering 48.7, a 3.3-point decrease compared to the reading of 52.0 reported in October. This expansion follows four consecutive months of slower deliveries, preceded by four straight months of faster deliveries.
The manufacturing inventories index stood at 48.1 percent in November, up a notable 5.5 points compared to the reading of 42.6 in October. It has remained under the neutral line of 50 for the past 22 months except in August 2024.
Among other subindexes, the prices paid index was at 50.3, down 4.5 points from 54.8 in October, indicating raw materials prices increased for the second straight month in November after decreasing in September. Aluminum, copper, and natural gas posted slight gains, offset by steel, plastic resins and crude oil moving down. In November 12% of companies reported higher prices, down from 20% in October.
The manufacturing sector is in the sixth contracting phase in the past 20 years. Previously, the ISM manufacturing PMI posted contraction just before the pandemic hit the global economy, from August to December 2019, and from March to May 2020. The deepest slump in the past two decades was recorded from September 2008 until July 2009 (the bottom was 34.5 in December 2008) triggered by the U.S. credit crisis.