The U.S. manufacturing sector showed signs of improvement in November, with the Manufacturing PMI rising to 48.4%, up 1.9 percentage points from October and the highest level since June, according to the latest Manufacturing ISM Report On Business.
- Despite the improvement, manufacturing remains in contraction territory for the eighth straight month and the 24th time in the past 25 months, signaling ongoing challenges for the sector.
Bright spots. New orders returned to expansion at 50.4%, ending a seven-month streak of contraction and pointing to slight demand growth. The Prices Index also remained in expansion territory at 50.3%, though it eased from October’s levels, indicating slower increases in input costs.
- Employment improved to 48.1%, its highest level since June, but still reflects contraction.
Overall Economy: Despite manufacturing’s struggles, the broader U.S. economy has remained resilient, continuing to expand for the 55th consecutive month (excluding a brief contraction in April 2020). A Manufacturing PMI above 42.5% is generally consistent with overall economic growth, underscoring the divergence between manufacturing’s challenges and broader economic performance.
What They’re Saying: Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that while demand is still weak, companies are beginning to plan for 2025 following the conclusion of the election cycle. Supply chain conditions have improved, with shorter lead times, although some product shortages persist. Production execution also slowed in November, consistent with soft backlogs and a sluggish demand environment.
Why It Matters: The manufacturing sector’s slow recovery reflects broader economic conditions, including moderating inflationary pressures and evolving demand patterns. If manufacturing continues to gain momentum into 2025, it could support stronger economic growth but may also sustain inflation risks, influencing Federal Reserve policy and interest rates.
Bottom Line: Manufacturing remains in contraction but is showing signs of stabilization. The sector’s recovery will play a critical role in shaping the U.S. economy’s trajectory, particularly as businesses navigate supply chain adjustments and shifting demand in the coming year.
