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ISM: Manufacturing Contracts for Fourth Straight Month

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing contracted for a fourth consecutive month in November, essentially staying in place, the Institute for Supply Management said today in a monthly report

The institute's manufacturing index, known as the PMI, slipped to 48.1 percent last month, down from 48.3 percent in October. Key parts of the index – new orders, production and employment – all showed contraction.

The pattern may continue until there’s more demand for manufactured products, the group said.

“Demand is the big story,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. Until demand improves, he said, “This is where we’re going to be.”

The index is considered a leading economic indicator and a barometer of where manufacturing is heading. The report is based on a survey of 350 purchasing and supply executives. A reading above 50 percent indicates economic growth while below 50 percent shows contraction.

The index has averaged 51.8 percent, or slow growth, for the past 12 months.

In November, five of 18 industries reported expansion, including apparel and miscellaneous manufacturing. Thirteen reported contraction, including fabricated metal products, transportation equipment, primary metals, and machinery.

The institute’s New Orders Index fell to 47.2 percent last month from 49.1 percent in October. That part of the overall PMI also has contracted for four straight months. Five of 18 industries reported economic expansion, with 12 showing contraction.

ISM’s Production Index improved to 49.1 percent in November, up from 46.2 percent the month before. Seven industries said production rose while 11 reported output cutbacks.

“Production slowed its contraction,” Fiore said. However, he added that output “remained held back by a lack of new orders.”

The group’s Employment Index declined to 46.6 percent last month, down from 47.7 percent in October. Five industries reported higher employment, with nine reporting job cuts.

Manufacturers are engaged in a “reassessment of manpower needs to meet future demand,” Fiore said.

One drag on manufacturing ended in late October. General Motors Co. resumed U.S. production following a 40-day strike by the United Auto Workers union.

“I think the strike is behind us now,” Fiore said. At the same time, he added, making up for lost production “is going to be difficult for the year” for GM.

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