US Manufacturing as measure by the November 2012 Manufacturing ISM Report On Business® is back in contraction.
The PMI™ registered 49.5 percent, a decrease of 2.2 percentage points from October’s reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month’s PMI™ reading reflects the lowest level since July 2009 when the PMI™ registered 49.2 percent. Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved.
ISM at a Glance
| Series Data | Nov Index | Oct Index | Percentage Point Change | Direction | Rate of Change | Trend (Months) |
|---|---|---|---|---|---|---|
| PMI™ | 49.5 | 51.7 | -2.2 | Contracting | From Growing | 1 |
| New Orders | 50.3 | 54.2 | -3.9 | Growing | Slower | 3 |
| Production | 53.7 | 52.4 | 1.3 | Growing | Faster | 2 |
| Employment | 48.4 | 52.1 | -3.7 | Contracting | From Growing | 1 |
| Supplier Deliveries | 50.3 | 49.6 | 0.7 | Slowing | From Faster | 1 |
| Inventories | 45 | 50 | -5 | Contracting | From Unchanged | 1 |
| Customers’ Inventories | 42.5 | 49 | -6.5 | Too Low | Faster | 12 |
| Prices | 52.5 | 55 | -2.5 | Increasing | Slower | 4 |
| Backlog of Orders | 41 | 41.5 | -0.5 | Contracting | Faster | 8 |
| Exports | 47 | 48 | -1 | Contracting | Faster | 6 |
| Imports | 48 | 47.5 | 0.5 | Contracting | Slower | 4 |
Expect Conditions to Worsen
It’s tough to pin this slowdown on hurricane Sandy although I suspect some will try. Others will blame the “fiscal cliff” but that theory does not have much credence either. After all, this is the 4th contraction in six months, long before Hurricane Sandy or fiscal cliff worries.
Instead, I propose global QE in the US, China, and Europe has finally played out for all that it’s worth and then some. Note that export orders have contracted every month for six months, and the backlog of orders every month for 8 months.
Eventually, employment had to catch up with those trends and it did. Employment fell 3.7 percentage points to 48.4.
Production is up 1.3 percentage points but with new orders and exports slowing rapidly, don’t expect that to last.
Mike “Mish” Shedlock
