The United States manufacturing industry contracted in November at a slower rate than the previous month, according to the Institute for Supply Management (ISM)’s November 2024 Manufacturing Report on Business released today.
The report showed a Manufacturing PMI of 48.4% in November, almost 2 points higher than the 46.5% figure posted in October.
ISM’s index is based on a survey of executives in 18 industries. The PMI is considered a leading economic indicator and a barometer of where manufacturing is headed. An index reading above 50% indicates economic expansion, while below 50% shows contraction.
“Demand continues to be weak but may be moderating, output declined again, and inputs stayed accommodative,” says Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.
Positive signs for demand include the New Orders Index returning to expansion territory (50.4%), New Export Orders Index increasing moderately (48.7 %), Backlog of Orders Index dipping further into contraction (41.8%) and Customers’ Inventories Index indicating levels were only marginally above “too low” (48.4%), according to Fiore.
The New Orders reading is 3.3 points higher than October’s 47.1%. New Orders hasn’t indicated consistent growth since a 24-month streak of expansion ended in May 2022.
“Panelists again noted a continued level of uncertainty and concern about a lack of new order activity, with a 1-to-1 ratio of positive comments versus those expressing concern about near-term demand, an improvement compared to October,” says Fiore.
November’s Inventories Index (48.1%) registered a 5.5-point increase over October (42.6%) as manufacturers closely manage working capital in the midst of the sector’s contracting economy, according to ISM.
“This month’s index reading indicating a slowing rate of contraction could suggest that companies are now willing to invest more for the future,” says Fiore.
Supplier deliveries to manufacturing organizations were made faster in November, registering 48.7% on ISM’s index, as additional supplier capacity provides material velocity benefits to panelists’ companies, according to Fiore. A reading below 50% indicates faster deliveries, while a reading above 50% reflects slower deliveries.
The Employment Index registered 48.1% in November, a 3.7-point increase over October’s 44.4%.
“Respondents’ companies are continuing to reduce head counts through layoffs, attrition and hiring freezes. 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,” Fiore says.
ISM’s Prices Index was 50.3%, 4.5 points lower compared with October’s 54.8%.
“The Prices Index indicated slightly increasing prices in November for the second consecutive month. Aluminum, copper, and natural gas registered slight increases, offset by steel, plastic resins and crude oil moving down in price,” Fiore says.
