U.S. manufacturing activity remained in contraction for the eighth consecutive month in November, but the pace of contraction moderated as new orders showed signs of recovery, according to data released by the Institute for Supply Management (ISM) on December 2.
The ISM Manufacturing PMI rose to 48.4 in November, up 1.9 percentage points from the prior month, exceeding market expectations of 47.7.
Among the sub-indices, the new orders index increased to 50.4 (from 47.1), marking the end of a seven-month contraction. The production index rose to 46.8 (from 46.2), and the inventory index improved significantly to 48.1 (from 42.6). These indicators suggest a modest recovery in demand following the resolution of election-related uncertainties.
The employment index also rose to 48.1 (from 44.4), remaining in contraction but showing improvement. The ratio of hires to layoffs improved from 1:3 last month to 1:1.5, aligning with signs of a broader labor market recovery.
In other indices, the customer inventories edged up to 48.4 (previous: 46.8), aligning with the inventory index's improvement, though both remained in contraction territory, highlighting the insufficient strength of demand recovery. The new export orders index rose to 48.7 (from 45.5), reflecting continued pressure from economic weakness in key trading partners such as the EU, Japan, and China. However, expectations of further stimulus measures in these regions may support a rebound in export activity in the near term.
Overall, while the conclusion of the presidential election has partially alleviated demand uncertainties, high interest rates continue to weigh on demand across most industries, particularly in construction and chemicals, which are closely tied to the real estate sector. As a result, the pace of recovery in overall demand remains subdued.
Sectoral disparities in demand were also evident. Among 14 manufacturing industries, only "Food, Beverage, and Tobacco," "Computer and Electronic Products," and "Electrical Equipment" reported expansion. The computer and electronic products sector demonstrated particularly robust growth, with increases in new orders, production, and backlogs. Notably, it was the only sector to report growth in backlogs, highlighting the continued strength in demand driven by AI-related orders.
ISM Industry Comments
“High mortgage rates continue to hamper demand for new housing construction, which is a key market for adhesives and sealants.” --Chemical Products
“Business remains slow. We anticipate that the first half of 2025 will be similar and hope that demand increases in the second half of 2025.” -- Transportation Equipment
“Inflation, even after easing, continues to impact demand. Consumers are looking for value, and purchasing behaviors are changing as many shoppers reduce consumption, causing softer volume.” -- Food, Beverage & Tobacco Products
“Backlog is rising precipitously after 18 months of troughing. The long-awaited pent-up buying has started. Competition for qualified technical labor is a constraint on operational throughput.” -- Computer & Electronic Products
“A general construction slowdown in the fourth quarter has created a surplus of finished goods, creating the need for an extra two weeks of shutdown over the Christmas holiday period. We are carefully watching demand in the first quarter to determine if more permanent workforce reductions will be necessary.” -- Machinery
“Business is slowing as customers destock and appear uncertain about near-term demand. Preliminary forecast for 2025 is down significantly; we hope to see improvements now that we are beyond U.S. election uncertainties.” -- Fabricated Metal Products
“Our supplier has a positive outlook on the U.S. economy going into 2025. Our business is seeing an uptick in sales forecasts for the first quarter of 2025 versus the fourth quarter of 2024. Overall, our outlook for 2025 is optimistic.” -- Textile Mills
“We’re finally seeing traction in the last few weeks (with) a higher volume of orders. Backlog is starting to grow.” --Electrical Equipment, Appliances & Components
“Late to the game, we are now working on our buying plan in light of potential increased tariffs on imports from China. Cost and capacity of U.S. manufacturing is a concern; a lack of relationship with alternate low-cost international manufacturers is another.” -- Miscellaneous Manufacturing
“After the election, we have seen an uptick in customers wanting to come back to the U.S. for making their products. We are working through these inquiries. They seem very motivated.” --Primary Metals