Manufacturing PMI® At 48.4%; November 2024 Manufacturing ISM® Report On Business®

TEMPE, Ariz. — December 2, 2024 — Economic activity in the manufacturing sector contracted in November for the eighth consecutive month and the 24th time in the last 25 months, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 48.4 percent in November, 1.9 percentage points higher compared to the 46.5 percent recorded in October. The overall economy continued in expansion for the 55th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index returned to expansion, albeit weakly, after seven months of contraction, registering 50.4 percent, 3.3 percentage points higher than the 47.1 percent recorded in October. The November reading of the Production Index (46.8 percent) is 0.6 percentage point higher than October’s figure of 46.2 percent. The Prices Index continued in expansion (or ‘increasing’) territory, registering 50.3 percent, down 4.5 percentage points compared to the reading of 54.8 percent in October. The Backlog of Orders Index registered 41.8 percent, down 0.5 percentage point compared to the 42.3 percent recorded in October. The Employment Index registered 48.1 percent, up 3.7 percentage points from October’s figure of 44.4 percent.

“The Supplier Deliveries Index indicated faster deliveries, registering 48.7 percent, 3.3 percentage points lower than the 52 percent recorded in October. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 48.1 percent, up 5.5 percentage points compared to October’s reading of 42.6 percent.

“The New Export Orders Index reading of 48.7 percent is 3.2 percentage points higher than the 45.5 percent registered in October. The Imports Index remained in contraction territory in November, registering 47.6 percent, 0.7 percentage point lower than October’s reading of 48.3 percent.”

Fiore continues, “U.S. manufacturing activity contracted again in November, but at a slower rate compared to last month. Demand continues to be weak but may be moderating, output declined again, and inputs stayed accommodative. Positive signs for demand include the (1) New Orders Index returning to expansion territory, (2) New Export Orders Index increasing moderately (up 3.2 percentage points but still in contraction territory), (3) Backlog of Orders Index dipping further into strong contraction territory, and (4) Customers’ Inventories Index indicating levels were only marginally above ‘too low.’ (For more, see the Customers’ Inventories Index summary section.) Output (measured by the Production and Employment indexes) continued in contraction: Employment shrunk, but at a much slower rate, and production took a small step in the right direction. Foundational industries like Chemical Products and Fabricated Metal Products (that provide products and components across the manufacturing sector) continued to show weakness, indicating that recovery may still be two to three months away. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories improving and suppliers continuing to improve delivery performance.

“Demand remains weak, as companies prepare plans for 2025 with the benefit of the election cycle ending. Production execution eased in November, consistent with demand sluggishness and weak backlogs. Suppliers continue to have capacity, with lead times improving but some product shortages reappearing. Sixty-six percent of manufacturing gross domestic product (GDP) contracted in November, up from 63 percent in October. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 48 percent in November, a 2-percentage point increase compared to the 46 percent reported in October. Two of the six largest manufacturing industries — Food, Beverage & Tobacco Products; and Computer & Electronic Products — expanded in November, the same number of industries as in October,” says Fiore.

The three manufacturing industries reporting growth in November are: Food, Beverage & Tobacco Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components. The 11 industries reporting contraction in November — in the following order — are: Printing & Related Support Activities; Plastics & Rubber Products; Chemical Products; Paper Products; Transportation Equipment; Fabricated Metal Products; Furniture & Related Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Primary Metals.

WHAT RESPONDENTS ARE SAYING

“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]

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.
*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY
Commodities Up in Price
Aluminum* (12); Caustic Soda; Copper (2); Copper Based Products; Electrical Components; and Natural Gas (2).

Commodities Down in Price
Aluminum*; Crude Oil; Diesel Fuel; Plastic Resin; Solvents; Steel — Hot Rolled; and Steel Products.

Commodities in Short Supply
Electrical Components (50); Electrical Equipment; Electronic Assemblies; and Electronic Components (8).

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Indicates both up and down in price.

NOVEMBER 2024 MANUFACTURING INDEX SUMMARIES

Manufacturing PMI®
The U.S. manufacturing sector contracted for the eighth consecutive month in November, as the Manufacturing PMI® registered 48.4 percent, 1.9 percentage points higher compared to the 46.5 percent reported in October. “After breaking a 16-month streak of contraction by expanding in March, the manufacturing sector has contracted for the last eight months. Of the five subindexes that directly factor into the Manufacturing PMI®, only one (New Orders) was in expansion territory, the same number of indexes as in October. The Production Index remained in contraction, but the New Orders Index moved into weak expansion in November. Of the six biggest manufacturing industries, two (Food, Beverage & Tobacco Products; and Computer & Electronic Products) registered growth,” says Fiore. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.

A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the November Manufacturing PMI® indicates the overall economy grew for the 55th straight month after last contracting in April 2020. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the November reading (48.4 percent) corresponds to a change of plus-1.7 percent in real gross domestic product (GDP) on an annualized basis,” says Fiore.

THE LAST 12 MONTHS

New Orders
ISM®’s New Orders Index expanded in November after seven consecutive months in contraction, registering 50.4 percent, an increase of 3.3 percentage points compared to October’s figure of 47.1 percent. The New Orders Index hasn’t indicated consistent growth since a 24-month streak of expansion ended in May 2022. “Of the six largest manufacturing sectors, three (Food, Beverage & Tobacco Products; Computer & Electronic Products; and Machinery) reported increased new orders. Panelists again noted a continued level of uncertainty and concern about a lack of new order activity, with a 1-to-1 ratio of positive comments versus those expressing concern about near-term demand, an improvement compared to October,” says Fiore. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

The five manufacturing industries that reported growth in new orders in November are: Textile Mills; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Machinery. The 10 industries reporting a decline in new orders in November — in the following order — are: Wood Products; Nonmetallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; Plastics & Rubber Products; Paper Products; Miscellaneous Manufacturing; Chemical Products; Transportation Equipment; and Primary Metals.

Production
The Production Index continued in contraction territory in November, registering 46.8 percent, 0.6 percentage point higher than the October reading of 46.2 percent. Of the six largest manufacturing sectors, two (Computer & Electronic Products; and Food, Beverage & Tobacco Products) reported increased production. “New order rates expanded only marginally as backlog levels continued to decline, causing manufacturers to reduce output to close the calendar year. As noted in the inventories section, companies are showing signs of willingness to invest in inventory, a marked departure from the last two years of activity,” says Fiore. An index above 52.2 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The six industries reporting growth in production during the month of November — in the following order — are: Textile Mills; Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Primary Metals; and Electrical Equipment, Appliances & Components. The eight industries reporting a decrease in production in November, in order, are: Nonmetallic Mineral Products; Paper Products; Plastics & Rubber Products; Chemical Products; Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; and Machinery.

Employment
ISM®’s Employment Index registered 48.1 percent in November, 3.7 percentage points higher than the October reading of 44.4 percent. “The index contracted for the sixth consecutive month after an expansion in May, which broke a seventh-month streak of contraction. Of the six big manufacturing sectors, only one (Food, Beverage & Tobacco Products) expanded employment in November. Respondents’ companies are continuing to reduce head counts through layoffs, attrition and hiring freezes. This sentiment was supported in November by the approximately 1-to-1.5 ratio of hiring versus staff reduction comments, compared to a 1-to-3 ratio the previous month, meaning less workforce reduction activity,” says Fiore. An Employment Index above 50.3 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of 18 manufacturing industries, the three industries reporting employment growth in November are: Wood Products; Paper Products; and Food, Beverage & Tobacco Products. The 10 industries reporting a decrease in employment in November, in the following order, are: Textile Mills; Chemical Products; Furniture & Related Products; Primary Metals; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Transportation Equipment; and Computer & Electronic Products.

Supplier Deliveries†
Delivery performance of suppliers to manufacturing organizations was faster in November, with the Supplier Deliveries Index registering 48.7 percent, a 3.3-percentage point decrease compared to the reading of 52 percent reported in October. This expansion follows four consecutive months of slower deliveries, preceded by four straight months of faster deliveries. After a reading of 52.4 percent in September 2022, the index went into contraction territory the following month and remained there for 20 out of 21 months (with February 2024 as the exception). Of the six big industries, none reported slower supplier deliveries in November. “Supplier deliveries moved into ‘faster’ territory as additional supplier capacity provides material velocity benefits to panelists’ companies,” says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The three manufacturing industries reporting slower supplier deliveries in November are: Nonmetallic Mineral Products; Wood Products; and Furniture & Related Products. The seven industries reporting faster supplier deliveries in November — listed in order — are: Primary Metals; Plastics & Rubber Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Computer & Electronic Products. Seven industries reported no change in supplier deliveries in November as compared to October.

Inventories
The Inventories Index registered 48.1 percent in November, up a notable 5.5 percentage points compared to the reading of 42.6 percent reported in October. “Manufacturing inventories remain at low-to-moderate levels, as the sector’s contracting economy continues to cause panelists’ companies and their customers to closely manage working capital, including inventories. This month’s index reading indicating a slowing rate of contraction could suggest that companies are now willing to invest more for the future. Of the six big industries, only one (Food, Beverage & Tobacco Products) reported increased manufacturing inventories in November,” says Fiore. An Inventories Index greater than 44.4 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

Of 18 manufacturing industries, the three industries reporting higher inventories in November are: Nonmetallic Mineral Products; Primary Metals; and Food, Beverage & Tobacco Products. The 10 industries reporting lower inventories in November — in the following order — are: Printing & Related Support Activities; Textile Mills; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; and Chemical Products.

Customers’ Inventories†
ISM®’s Customers’ Inventories Index registered a reading of 48.4 percent in November, up 1.6 percentage points compared to the 46.8 percent reported in October. “Customers’ inventory levels in November were marginally above ‘too low.’ Panelists are reporting that the amounts of their products in their customers’ inventories suggest a demand level that is neutral for future new orders and production,” says Fiore.

The four industries reporting customers’ inventories as too high in November are: Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; and Miscellaneous Manufacturing. The eight industries reporting customers’ inventories as too low in November, in order, are: Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; and Machinery.

Prices†
The ISM® Prices Index registered 50.3 percent, 4.5 percentage points lower compared to the October reading of 54.8 percent, indicating raw materials prices increased for the second straight month in November after decreasing in September. Of the six largest manufacturing industries, three — Fabricated Metal Products; Transportation Equipment; and Chemical Products — reported price increases in November. “The Prices Index indicated slightly increasing prices in November for the second consecutive month. Aluminum, copper, and natural gas registered slight increases, offset by steel, plastic resins and crude oil moving down in price. Twelve percent of companies reported higher prices in November, compared to 20 percent in October,” says Fiore. A Prices Index above 52.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

In November, the five industries that reported paying increased prices for raw materials are: Textile Mills; Miscellaneous Manufacturing; Fabricated Metal Products; Transportation Equipment; and Chemical Products. The six industries reporting paying decreased prices for raw materials in November, in order, are: Petroleum & Coal Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Food, Beverage & Tobacco Products; and Computer & Electronic Products. Six industries reported no change in prices in November as compared to October.

Backlog of Orders†
ISM®’s Backlog of Orders Index registered 41.8 percent, a decrease of 0.5 percentage point compared to the October reading of 42.3 percent, indicating order backlogs contracted for the 26th consecutive month after a 27-month period of expansion. Of the six largest manufacturing industries, only one (Computer & Electronic Products) reported expanded order backlogs in November. “The index remained in deep contraction in November, as improvement in new orders coupled with reduced production levels were insufficient to prevent backlogs from declining further,” says Fiore.

Of the 18 manufacturing industries, four reported growth in order backlogs in November: Textile Mills; Paper Products; Primary Metals; and Computer & Electronic Products. The 11 industries reporting lower backlogs in November — in the following order — are: Petroleum & Coal Products; Wood Products; Furniture & Related Products; Plastics & Rubber Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Transportation Equipment.

New Export Orders†
ISM®’s New Export Orders Index registered 48.7 percent in November, up 3.2 percentage points from October’s reading of 45.5 percent. “The New Export Orders Index reading indicates that export orders contracted for a sixth month after expanding in May and contracting in April, with two straight months of expansion before that. New export orders continue to be weak, as international trading partners struggle with weak economies, but the slowing rate of contraction may indicate that stimulus measures taken by countries like China and Japan could be starting to have an effect on U.S. export orders,” says Fiore.

The five industries reporting growth in new export orders in November are: Textile Mills; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Miscellaneous Manufacturing. The five industries reporting a decrease in new export orders in November are: Nonmetallic Mineral Products; Primary Metals; Transportation Equipment; Fabricated Metal Products; and Chemical Products. Six industries reported no change in exports in November.

Imports†
ISM®’s Imports Index continued to indicate cooling in November; the reading of 47.6 percent is 0.7 percentage point lower compared to the reading of 48.3 reported in October. “Imports contracted for the sixth month in a row after five consecutive months of expansion, preceded by 14 consecutive months of contraction. Panelists’ companies continue to limit their investments in inventories, as overall growth potential begins to solidify,” says Fiore.

The four industries reporting an increase in import volumes in November are: Textile Mills; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Electrical Equipment, Appliances & Components. The eight industries that reported lower volumes of imports in November, in order, are: Paper Products; Furniture & Related Products; Transportation Equipment; Primary Metals; Fabricated Metal Products; Miscellaneous Manufacturing; Chemical Products; and Machinery.

†The Supplier Deliveries, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders, and Imports indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy
The average commitment lead time for Capital Expenditures in November was 170 days, an increase of two days compared to October. Average lead time in November for Production Materials was 79 days, a decrease of two days compared to October. Average lead time for Maintenance, Repair and Operating (MRO) Supplies was 44 days, a decrease of two days compared to October.

Posted: December 2, 2024

Source: Institute for Supply Management