US Manufacturing: November Update
The ISM Manufacturing Report on Business is released on the first business day of each month and is often hailed as the most important leading indicator. An index number above 50 suggests growth in the manufacturing segment of the economy, and a number below 50 suggests contraction. Here are the highlights for November:
Economic activity in the manufacturing sector grew for the seventh consecutive month.
Demand expanded as new orders and production grew at strong levels
Backlogs increased as supplier deliveries slowed at a faster rate
Prices increased as imports and exports grew
Most commodities including aluminum, lumber, natural gas and steel were up in price
Source: Institute for Supply Management. Table created by The Macro Mail.
The manufacturing PMI numbers for November illustrate slowing but consistent growth across most of the components of the manufacturing index. Employment registered the only contraction, with Printing & Related Support Activities and Petroleum & Coal Products exhibiting the largest decline. New orders, which lead overall Manufacturing, continued to remain strong, suggesting that the manufacturing economy will continue to recover in the coming months.
Sector Performance:
The ISM is particularly useful because it breaks down and ranks the sectors of the manufacturing economy according to growth.
Apparel and Wood Products continued to exhibit strong growth, suggesting that clothing manufacturers and housebuilders may perform well in Q4.
Petroleum & Coal Products continued to lag behind, indicating that crude oil prices and energy companies may not recover meaningfully anytime soon.
Source: Institute for Supply Management. Table created by The Macro Mail.
New Orders:
New orders tend to lead overall US manufacturing and can be used as an indication of what the ISM index will look like next month.
Petroleum & Coal products continued to contract.
Textile Mills returned to growth supporting the theory that clothes manufacturing will continue to recover going into the winter months.
Wood products exhibited strong growth in line with stellar housing demand across the US.
Source: Institute for Supply Management. Table created by The Macro Mail.
Employment:
Employment was the only component of the ISM Manufacturing Index to contract in November.
In line with new orders, Petroleum & Coal Products and Printing & Related Support Services continued to contract.
Wood Products continued to outperform suggesting that housebuilder demand remains strong across the US.
Textile Mills returned to growth indicating that clothing production will continue to grow.
Source: Institute for Supply Management. Table created by The Macro Mail.
Purchasing Manager Comments:
Comments from purchasing managers provide a keen insight into how companies in the different sectors view their own growth trajectories going forward. Here are the highlights:
“We will finish out the fourth quarter very strong. Customers have increased demand and 2021 is expected to continue to grow.” - Fabricated Metal Products
“Our business is booming, as many customers need products ASAP. A great situation.” - Primary Metals
“We are getting a lot more COVID-19 hits in our factories. We are also sending employees home for 14 days to quarantine if they were in close proximity to individuals that tested positive. We have had to shut down production lines due to lack of staffing. Cost of goods sold [COGS] is much higher than normal due to labor and production inefficiencies.” - Food, Beverage & Tobacco Products
“Jet fuel being down in consumption really hurts the refining market.” - Petroleum & Coal Products
Source: Institute for Supply Management. Table created by The Macro Mail.
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