U.S. Manufacturing Index Indicates First Contraction Since May 2020

Activity in the U.S. manufacturing sector contracted for the first time in over two years in the month of November, according to a report released by the Institute for Supply Management on Thursday.

The ISM said its manufacturing PMI slipped to 49.0 in November from 50.2 in October, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 49.8.

With the slightly bigger than expected decrease, the manufacturing PMI fell to its lowest level since hitting 43.5 in May of 2020.

“The U.S. manufacturing sector dipped into contraction, with the Manufacturing PMI at its lowest level since the coronavirus pandemic recovery began,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

He added, “With Business Survey Committee panelists reporting softening new order rates over the previous six months, the November composite index reading reflects companies’ preparing for future lower output.”

The modest decrease by the headline index came as the new orders index dipped to 47.2 in November from 49.2 in October, suggesting a slightly accelerated contraction in new orders.

The production index also edged down to 51.5 in November from 52.3 in October, indicating a modest slowdown in the pace of growth.

Pointing to a downturn in employment in the manufacturing sector, the employment index also slipped to 48.4 in November from 50.0 in October.

A separate report released by payroll processor ADP on Wednesday said employment in the manufacturing sector tumbled by 100,000 jobs in November.

The ISM report also showed prices decreased at accelerate rate, as the prices index slid to 43.0 in November from 46.6 in October, hitting its lowest level since May 2020.

Next Monday, the ISM is scheduled to release a separate report on service sector activity in the month of November. The services PMI is expected to inch up to 55.6 in November from 54.4 in October.

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