ISM: Manufacturing Activity Contracts

The latest report from the Institute of Supply Management shows that the trend toward a growing economy continues, but that manufacturing suffered a contraction in November, as compared with the previous month's numbers.

The latest survey of 18 manufacturing industries shows that the PMI metric fell to 49.5% from October's 51.7%, representing a contraction in the manufacturing sector and the lowest reading since July 2009. A reading below 50% indicates that the manufacturing economy is generally contracting.

Respondents to the survey noted that new orders slowed from October, with some commenting that Superstorm Sandy delayed some deliveries. While new orders and production saw gains, employment did not, decreasing by 3.7 percentage points from the previous month. Ten of the 18 reporting industries reported a drop in employment, and the Employment Index reflected its lowest value, at 48.4%, since September 2009. Customers' inventories were also at an 11-month low, with the current value of 42.5% last being seen in December of last year.

Comments from survey participants reflect an overall perception of a downshifting business climate, with demand declining steadily in the second half of 2012 as compared with the first two quarters. The major concern registered is that of uncertainty related to the resolution of the fiscal cliff negotiations.

The Manufacturing ISM Report On Business presents a national profile of the manufacturing sector, and reflects information gathered from purchasing and supply managers on a month-to-month basis. The report is released by ISM on the first business day of each month.

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