US Manufacturing Surges in November, With Price Gains Slowing Sharply

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Manufacturing saw its activity accelerate in the United States in the month of November. This report from the Institute for Supply Management (ISM) comes at a time when many other economic indicators were signaling a slight drop in the growth rates. The end result is that the overall economy grew for the 115th consecutive month.

November’s ISM showed that its purchasing managers index (PMI) rose by 1.6% from October to 59.3%. Dow Jones was calling for a reading of just 57.9%. Growth was seen in new orders, production and employment.

Investors and economists generally consider that levels above 50.0 indicate growth, while readings under 50.0 generally indicate contraction.

The New Orders Index rose by 4.7 percentage points to 62.1% in November. A lower gain of 0.7 points was seen in the Production Index, with a 60.6% reading in November.

Other growth was seen in November over October as well. The Employment Index rose by 1.6 points to 58.4%, and the Supplier Deliveries Index rose by 1.3 points to 62.5%. The Inventories Index rose by 2.2 points to 52.9%.

Also worth note has been the prices, with so much attention being paid to inflation, and the recent drop in energy and other commodities was a big factor that should easily quell some of the Federal Reserve’s fears that inflation is getting out of hand. The ISM’s Prices Index fell by a sharp 10.9 points to 60.7%, after October’s reading of 71.6%. Still, this represented that raw materials prices have risen (again with 50.0 as the breakeven) for the 33rd consecutive month.

A total of 18 manufacturing industries are surveyed each month to compile the ISM and PMI data. In November, 13 of the 18 reported growth. Two industries were flat, and the following three industries signaled contraction: Printing & Related Support Activities; Nonmetallic Mineral Products; and Primary Metals.

The PMI statement for November said:

Comments from the panel reflect continued expanding business strength. Demand remains strong, with the New Orders Index rebounding to above 60 percent, the Customers’ Inventories Index declining and remaining too low, and the Backlog of Orders Index steady. Consumption strengthened, with production and employment continuing to expand, both at higher levels compared to October. Inputs — expressed as supplier deliveries, inventories and imports — gained as a result of inventory growth. Supplier delivery easing improved factory consumption as well as inventory growth, and import expansion was relatively stable. Lead-time extensions continue, while steel and aluminum prices are declining. Supplier labor issues and transportation difficulties are at more manageable levels, but they continue to limit production potential.

The expansion of new export orders was stable and at a recent historical low. However, four of six major industries contributed, down from five in October. Prices pressure continues, but at notably lower levels than in prior periods. The manufacturing community continues to expand, with November adding positively to the three-month rolling PMI average.

Most of the news flow has been tied to the delayed tariffs acting as a ceasefire in the trade war with China. The Dow Jones industrials were last seen up 353 points at 25,891 and the S&P 500 was last seen up 33 points at 2,792. NYMEX Crude was last seen up $2.03 at $52.96 per barrel.