The ISM manufacturing report for November is dismal. The headline number didn’t change but details look worse.
Please consider the ISM Manufacturing Report for November 2023.
The U.S. manufacturing sector contracted in November, as the Manufacturing PMI® registered 46.7 percent, the same figure recorded in October. “This is the 13th month of contraction. All of the five subindexes that directly factor into the Manufacturing PMI® are in contraction territory, up from four in October. The New Orders Index logged its 15th month in contraction territory, but at a slower rate in November,” said Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management®.
A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the November Manufacturing PMI® indicates the overall economy contracted for a second straight month after one month of growth preceded by nine consecutive months of contraction and 30 months of expansion from June 2020 to November 2022. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the November reading (46.7 percent) corresponds to a change of minus-0.7 percent in real gross domestic product (GDP) on an annualized basis,” says Fiore.
Key Details
- Production: The Production Index dropped into contraction territory in November, registering 48.5 percent, 1.9 percentage points lower than the October reading of 50.4 percent. This follows two months of expansion preceded by one month of “unchanged” status and two months of contraction.
- New Orders: ISM®’s New Orders Index contracted for the 15th consecutive month in November, registering 48.3 percent, an increase of 2.8 percentage points compared to October’s reading of 45.5 percent.
- Employment: ISM®’s Employment Index registered 45.8 percent in November, 1 percentage point lower than the October reading of 46.8 percent. The index indicated employment contracted again in November after one month of expansion and three months of contraction before that. An Employment Index above 50.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.
- Prices: The ISM® Prices Index registered 49.9 percent, 4.8 percentage points higher compared to the October reading of 45.1 percent, indicating raw materials prices decreased in November for the seventh consecutive month, though just barely and essentially flat month over month.
- Backlog of Orders: ISM®’s Backlog of Orders Index registered 39.3 percent, a 2.9-percentage point decrease compared to October’s reading of 42.2 percent, indicating order backlogs contracted for the 14th consecutive month (and at a faster rate in November) after a 27-month period of expansion. None of the six largest manufacturing sectors expanded order backlogs in November. The index recorded its lowest level since June 2023, when it registered 38.7 percent. “For the third straight month, the index remains in strong contraction as production rates and new order levels continue to have a negative effect on backlogs,” says Fiore.
- New Export Orders: ISM®’s New Export Orders Index registered 46 percent in November, 3.4 percentage points lower than the October reading of 49.4 percent. “The New Export Orders Index indicated that export orders contracted for the sixth consecutive month in November; the index has shown weak performance for the last 16 months. Comments continue to note overall weakness,” says Fiore.
Select Respondent Comments
- “Economy appears to be slowing dramatically. Customer orders are pushing out, and all efforts are being made to right-size inventory levels, both to mitigate carrying costs on pushed-out orders and to load up on inventory where costs are exploding, like cold-rolled steel.” [Computer & Electronic Products]
- “Starting to feel softening in the economy, with labor still a challenge to backfill critical roles. The 2024 forecast looks challenging, specially from a cost perspective.” [Chemical Products]
- “Nearly all microchip supply issues have been resolved, finally bringing an end to the three-year chip shortage. Material prices are remaining relatively flat. Supply chain issues continue in several areas, resulting from difficulties during the United Auto Workers (UAW) strike.” [Transportation Equipment]
- “Automotive sales still impacted by UAW strike. Still waiting for orders to come in, and we also need to work down inventory levels that increased during the strike period. This will most likely happen in December.” [Fabricated Metal Products]
- “Customer orders have pushed into the first quarter of 2024, resulting in inflated end-of-year inventory.” [Miscellaneous Manufacturing]
- “Elevated financing costs have dampened demand for residential investment. Our business has been negatively impacted through reduced new orders for our products and services. We are purchasing less for production and finished goods inventories.” [Wood Products]
There are more comments and many more details in the report.
Spotlight Employment and Backlogs
I put highlights on employment and backlogs because they are related.
Manufacturers are very reluctant to let workers go because it took them years to add to staff.
The manufacturers smooth out falling demand in new orders by working on backlogs. But the backlog index has plunged to 39.3 and has been declining rapidly.
Manufacturers will have a choice of reducing hours or cutting employees as the “Economy appears to be slowing dramatically.”
Biden Creates a New Economic Council on Supply Chains
Please consider my November 29, Hoot of the Day: Biden Creates a New Economic Council on Supply Chains
Perfect Timing!
What better time could there possibly be to create this task force adding over 20 individual agencies as co-chairs to an obviously critical mission than when supply chain pressures are at a record low of -1.74?
Today, we can add “Nearly all microchip supply issues have been resolved, finally bringing an end to the three-year chip shortage.”
Well done Mr. President.
Looks like the mirage is finally coming to an end. Boy that took long enough! You must tip your hat to Biden Inc. for being able to hide it all this time.
Man that took a lot of work, man hours, phone calls, emails, trips abroad and at home, and so on and so on.
That money was also helping out the economy (I know weird), as what was left, after all the kickbacks, payoffs, payouts, grifting etc. was going into the economy in the way of jobs. I know most were useless, like the climate change agenda, but that money was flowing around just the same.
So it looks like the recession, which has been here all along, but hidden by the above information, will show its face NOW!
Now what do we do? Clot Shots to thin out the herd once again perhaps? I am not so sure that will work this time. Where are all the people not working going to do for money? The Government’s broke so don’t look there for help. Heck, they want to cut SS by 20% already. Don’t all those Unions have Pensions to cover? Where will that money come from? They just ate through the worker benefits, which will end up helping to get them in trouble even faster.
What an absolute Cluster &#*@!!!
The money will come from 401k plans.
What we all need is More Stimulus!
This week was a 1-2 gut punch at work. First we were told to stop work until an investor was lined up for the project. Then one of our major customers started discussions about reducing production or taking it elsewhere. I’m hedging my bets.
s&p 500 is up 19% for the year with a month to go. Hope you didn’t miss out.
This is particularly concerning as manufacturing is one component of the economy that produces wealth as are agriculture, mining and construction. Basically,. the rest is consumption that consumes wealth. When wealth generation is less than consumption, we have contraction. In the GDP equation, spent borrowing is considered but the incurred debt is not, presumably because the debt is assumed to be paid off in the future. To better assess whether the economy is growing, borrowed money, particularly printed borrowed money, needs to be subtracted. Given this, the economy has been in recession for quite a while. I believe consideration of the above is the reason statistics are not yet showing a recession, GDI is woefully less than GDP, and explains why US citizens are feeling much more economic pain than the government or the Federal Reserve acknowledge.
One more consideration; if our economy is 70% consumption, then the other 30% must pay the way or we will be consuming the nation’s collective wealth.
Just to clarify:
Consumption includes consumption of services (ie haircuts, plumber fixing a leaky faucet etc) in addition to consumption of goods.
So the other 30% is not paying for 70%.
Correct, but consider in a few weeks another haircut is required to look good again and the repaired faucet is returned to the value prior to leaking, thus money was spent but there is no increase in value. To side with your comment, the leaky faucet was basically worthless at the time repairs were implemented. therefore, there is added value looking at it that way.
I believe my major point to be correct. Money spent on vacation is wealth consumed by the vacationer, he has to engage in a wealth building activity to replace it. The vacation providers have earned the wealth to either consume or invest.
But wealth consumed by the someone is simply wealth accumulated by someone else (for the vacationer it goes to the hotelier, restaurant owner etc for the person getting the haircut it goes to the barber/hair dresser).
It only disappears from the country if the vacationer is vacationing in another country.
In 2021/2022 car dealerships made record profits. They expanded and built fancy dealerships that are ready these days. During UAW strikes mfg dumped inventory on dealers, recording great revenue and earnings. They are still waiting for orders to come. Mexico will pay the price.
Off topic here, but IMPORTANT!!
This proper review of the corruption and destruction of our rule of law needs wide distribution.
“All those who enter here abandon all hope.”
https://www.armstrongeconomics.com/international-news/rule-of-law/why-our-legal-system-is-collapsing/
After all credit cards are maxed out Joe Lunch Bucket applies for another credit card. I never would have thought about that. What do San Francisco thieves eat after every grocer leaves the city? Uber Eats!
What if the strong employment is just boomers retiring in droves?
The youngest Boomers are 59? Born in 1964.
that means that we effectively have a FAIRLY large population of NEAR-RETIREDS. Many of these youngest Boomers may well continue to work into their early 70’s.
I see a LOT of older Boomers working at Walmart and many others do part-time Cleaning Jobs (some for my In-laws) and they are in their mid-70’s and COMPLETELY worn out, with back problems and they are HOUSE cleaning for my more Rich In-laws how are in their 80’s.
“we effectively have a FAIRLY large population of NEAR-RETIREDS. Many of these youngest Boomers may well continue to work into their early 70’s.”
Correct other than I would change “fairly large” to “large”
People that were foolishly spending instead of saving will probably have to work for the remainder of their life.
People that were foolishly saving will also have to work for the remainder of their life due to inflation.
M