Business Finance

ISM Manufacturing Gauge Unexpectedly Slides, Remaining in Contraction for 4th Straight Month

Manufacturing in the US continued to remain in contraction territory, edging lower more than expected in November, while a separate reading on the sector rose more than expected.

The Institute for Supply Management’s purchasing managers’ index was 0.2 percentage point lower at 48.1% in November, under the Econoday consensus for 49.4%. A reading above 50% indicates the economy is expanding, while a print below that level signals a contraction.

The new orders index fell to 47.2% from 49.1%, while employment slid 1.1 points to 46.6%. Prices rose 1.2 points to 46.7%, while the imports index rose three points to 48.3%.

“November was the fourth consecutive month of PMI contraction, at a faster rate compared to the prior month,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee.

“This is a soft report, and the fall in orders, if sustained, suggests the headline index could dip a bit further in December,” said Pantheon Macroeconomics Chief Economist Ian Shepherdson. “Additionally, this will weigh on job growth and capex over the next few months, to the point where we are not ready to rule out a further easing in January.”

Separately, the IHS Market US Manufacturing PMI rose to 52.6 last month from 51.3 in October, the highest headline figure since April.

“A third consecutive monthly rise in the PMI indicates that US manufacturing continues to pull out of its soft patch,” said Chris Williamson, chief business economist at IHS Markit. “New orders and production are rising at the fastest rates since January, encouraging increasing numbers of firms to take on more workers.”

“While the outlook has improved, further growth is by no means assured,” Williamson said. “Survey respondents continue to report widespread concerns over issues such as tariffs, the auto sector’s ongoing malaise, a lack of pricing power amid weak demand and uncertainty about the economic and political situation over the coming year.”

Williamson urged caution, saying the survey results “merely translate into very subdued growth in comparable official gauges of manufacturing production and factory payrolls. Business sentiment also remains worryingly subdued, with expectations about future output growth well down on earlier in the year and running at one of the lowest levels since comparable data were first available in 2012.”

He said companies continue to be concerned about “the disruptive effects of tariffs and trade wars in particular, both in terms of rising prices and weakened demand.”

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Stephanie Johnston

Stephanie Johnston

Stephanie Johnston is one of the highly experienced employees among the staff at the Expert Recorder news portal. She is dedicated to write and edit Business and Finance related articles. She has acquired the Master’s Degree in Business, and after that preferred to pursue her career in financial writing. She also manages to write motivational finance blogs to make readers aware of the stock market. In this gadget-surrounded world, she enjoys outdoor activities such as cycling and jogging.