U.S. manufacturers signalled a loss of momentum in November, with business conditions improving at the slowest pace since October 2013. This was highlighted by a fall in the final seasonally adjusted Markit U.S. Manufacturing Purchasing Managers’ Index™ (PMI™) from 54.1 to 52.8 during November. Although still above the neutral 50.0 value, the latest reading was weaker than the post-crisis average (54.3) and signalled a relatively subdued manufacturing sector performance over the month.
Softer new business growth was the main factor weighing on the manufacturing PMI in November. Volumes of new work rose at the weakest pace for just over two years, which survey respondents attributed to reduced client confidence and weak export demand. Latest data indicated a fall in new work from abroad for the first time since August, reflecting pressure from the strong dollar and less favourable global economic conditions.
Output growth moderated during the latest survey period, following a seven-month high recorded in October. Moreover, backlogs of work decreased for the first time since November 2014, suggesting a lack of pressure on operating capacity. Manufacturers sought to lower their stocks of finished goods in response to softer growth patterns, with post-production inventories decreasing for the fourth month running.
November data indicated that manufacturers were more cautious in terms of their staff hiring, as jobs growth moderated since the previous month and was below the post-crisis trend. Anecdotal evidence suggested that greater concerns about the economic outlook and a less upbeat assessment of near-term client demand had limited the latest rise in payroll numbers across the manufacturing sector.
At the same time, input buying also expanded at a slower pace than in October. This contributed to a weaker rise in pre-production inventories, but did not prevent another slight deterioration in supplier performance. That said, the latest lengthening of vendor lead-times was the least marked since July.
Average cost burdens continued to fall across the manufacturing sector in November, which extended the current period of decline to three months. Survey respondents mostly commented on lower commodity prices and reduced transportation costs. Meanwhile, factory gate charges were reported to have risen slightly during November, but the pace of inflation remained below the long-run survey average.
Markit’s final manufacturing PMI came in 0.2 above the flash PMI.
The ISM:
The November PMI® registered 48.6 percent, a decrease of 1.5 percentage points from the October reading of 50.1 percent. The New Orders Index registered 48.9 percent, a decrease of 4 percentage points from the reading of 52.9 percent in October. The Production Index registered 49.2 percent, 3.7 percentage points below the October reading of 52.9 percent. The Employment Index registered 51.3 percent, 3.7 percentage points above the October reading of 47.6 percent. The Prices Index registered 35.5 percent, a decrease of 3.5 percentage points from the October reading of 39 percent, indicating lower raw materials prices for the 13th consecutive month. The New Export Orders Index registered 47.5 percent, unchanged from October, and the Imports Index registered 49 percent, up 2 percentage points from the October reading of 47 percent. Ten out of 18 manufacturing industries reported contraction in November, with lower new orders, production and raw materials inventories accounting for the overall softness in November.
