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United States PMI November 2019

United States: Downturn in manufacturing sector worsens in November

The Institute for Supply Management (ISM) manufacturing index sank to 48.1 in November from 48.3 in October, underwhelming market expectations of 49.4. Consequently, the index remained below the 50-threshold that separates contraction from expansion in the sector.

The further deterioration in November came on the back of weaker demand. New orders, which have fallen for four months running, contracted at a sharper rate and were largely dragged on by falling new business inflows in transportation and equipment. This came as new export orders returned to contraction territory. Likewise, customers’ inventories remained “too low” according to survey respondents, although this bodes well for future factory output. Meanwhile, backlogs of work fell for the seventh consecutive month. Persistently weak demand fed through to the sector’s labor force, with job losses worsening in November. On the upside, the decline in production softened notably in the survey month, with three of the top six industries reporting expansions in output.

Turning to inputs, inventories shrank at a faster clip than the prior month, although supplier delivery times lengthened in November. Meanwhile, imports continued to contract, albeit at a weaker rate, while prices fell for sixth consecutive month. On the whole, supply chains continue to meet demand; however, companies are concerned that materials may not be consumed in a reasonable time period.

Comments from ISM respondents suggest manufacturers are heeding caution amid the uncertain trade backdrop, as one respondent noted: “[The] economy is holding up. Business is staying constant. The same challenges persist — foreign exchange, trade uncertainty and trend changes.” Another respondent commented that “economic uncertainty continues. Our outlook on future business is cautious, yet positive.”

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