Manufacturing Slump Deepens in November as Orders Decline
Tariff Uncertainty and Rising Costs Pressure Factory Demand
Key Takeaways:
- U.S. factory activity contracted in November as the ISM manufacturing index fell to 48.2, its ninth straight month below 50.
- Orders posted their sharpest drop since July and employment contracted more steeply as tariff uncertainty and higher material costs weighed on demand.
- ISM officials said manufacturing is unlikely to improve until trade clarity emerges, though production and supplier delivery times showed modest signs of stabilization.
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U.S. factory activity shrank in November by the most in four months as orders weakened, indicating manufacturers are struggling to break free from an extended period of malaise.
The Institute for Supply Management’s manufacturing index eased 0.5 point to 48.2, according to data released Dec. 1. The measure has been below 50, which indicates contraction, for nine straight months.
The survey suggests the nation’s manufacturing base remains bogged down by trade policy uncertainty and elevated production costs. The ISM index of prices paid for materials picked up for the first time in five months and is about 8 points higher than a year ago.
Customer demand has largely been uninspiring as well. Orders contracted in November at the fastest pace since July, while backlogs shrank by the most in seven months.
Susan Spence, chair of the ISM Manufacturing Business Survey Committee, said uncertainty about tariffs is driving the pullback because customers are holding off on orders until there’s more clarity on the cost of goods.
“We do not see anything on the horizon that’s going to turn the ship until there is more certainty,” Spence said on a call with reporters.
(Bloomberg)
The soft demand conditions help explain a steeper contraction in factory employment last month. Roughly 25% of respondents reported lower employment, the largest share since mid-2020.
Meanwhile, the group’s production index rebounded in November, expanding at the fastest clip in four months. Despite the advance, output this year has been uneven.
Eleven manufacturing industries contracted in November, led by apparel, wood and paper products and textiles. Four industries, including computer and electronic products, reported growth — the fewest in a year.
The survey also showed that supplier delivery times of materials for manufacturers quickened for the first time in four months.
Producers’ and customers’ inventories continued to shrink, although at slower paces than a month earlier.
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