The manufacturing economy fell into contraction in November after a 29-month streak of expansion, the Institute for Supply Management said today.
Tempe, Ariz.-based ISM’s manufacturing index, known as the PMI, slipped to 49 percent. It was the lowest index level since May 2020 when the economy was in the grip of the COVID-19 pandemic. The index registered 43.5 percent that month.
With the PMI, a reading above 50 percent indicates the manufacturing economy is expanding while below that level shows contraction. The index is based on a survey of executives in 18 industries. The PMI was 50.2 percent in October and averaged 54.4 percent the past 12 months.
Last month, six industries reported economic growth, including apparel, primary metals, miscellaneous manufacturing, and transportation equipment. Twelve industries reported contraction, including wood products, textile mills, fabricated metal products and machinery.
In November, there were “clear signs of demand softening,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
“I still think this is a soft contraction,” Fiore said. “I’m hopeful some of the demand will come back.”
The Federal Reserve is boosting interest rates to slow the economy and reduce inflation. Also, China has seen mass protests against government restrictions to combat COVID-19.
Fiore said “the interest rate environment” is affecting manufacturing. With China, “I think it’s all headwinds,” he said. “We look at China as being sluggish for some time.”
The institute’s New Order Index was 47.2 percent in November, the third consecutive month in contraction territory. Only apparel reported an increase in new orders while 14 industries reported a decline.
ISM’s Production Index registered at 51.5 percent in November, down from 52.3 percent the month before. Seven industries reported an increase in output while seven reported declines.
The group’s Employment Index was at 48.4 percent last month. Seven industries reported job gains while five reported job decreases.
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