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PMI Slips Again as Uncertainty Roils the Manufacturing Sector

The Index drops to 48.1% in its fourth straight month of contraction.

Manufacturing contracted for the fourth straight month as the uncertainty over trade and import policies continued to impact demand and new orders.

The Institute for Supply Management’s November PMI Index fell 0.2 percentage points to 48.1% as the index remained below the 50% level that indicates manufacturing growth. The New Orders Index fell 1.9 percentage points to 47.1%. The November production reading was up 2.9 percentage points to 49.1%, and both the imports and exports indexes remained below the 50% level.

Timothy R. Fiore, chairman of the ISMManufacturing Business Survey Committee, noted that the PMI not only remained below 50%, but the rate of decline was accelerating. “November was the fourth consecutive month of PMI contraction, at a faster rate compared to the prior month,” Fiore said in a press release. “Demand contracted, with the New Orders Index contracting faster, the Customers’ Inventories Index remaining at ‘too low’ levels, and the Backlog of Orders Index contracting for the seventh straight month—and at a faster rate.

“Global trade remains the most significant cross-industry issue,” Fiore said. “Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Fabricated Metal Products is the weakest. Overall, sentiment this month is neutral regarding near-term growth.”

That uncertainly was reflected in the comments reported from committee members:

  • “Business level is similar to October.” (Computer & Electronic Products)
  • “Chemical industry has been slow globally, but the curve seems to be flattening.” (Chemical Products)
  • “Economic uncertainty continues. Our outlook on future business is cautious, yet positive.” (Transportation Equipment)
  • “Economy is holding up. Business is staying constant. The same challenges persist—foreign exchange, trade uncertainty, and trend changes [for example, sugar reduction].” (Food, Beverage & Tobacco Products)
  • “Slowdown in business has us revising our 2020-21 capital spend.” (Petroleum & Coal Products)
  • “The order book continues to shrink below our forecast levels. We’re unsure at this point how much of the slowdown is tied to certain events [like the General Motors strike], year-end inventory reductions by customers, or a worsening economy. We don’t expect clarity on this until early 2020, when we expect to either see restocking orders [a good sign] or not [a bad sign].” (Fabricated Metal Products)
  • “Demand has stabilized for the last half of [the fourth quarter], and production will be stable for the rest of this year.” (Machinery)
  • “Heading into the holiday season, we are seeing the backlog decrease as new orders for 2020 seem lighter than in past years.” (Plastics & Rubber Products)
  • “Markets have downshifted further. The continued confusion surrounding China trade has kept export markets on edge. Profits are elusive. Cash-flow planning is paramount. The general economy is slowing down.” (Wood Products)
  • “Incoming orders and production have ticked back up. Tariffs are still a question.” (Furniture & Related Products)

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