Industrial Market Woes: Purchasing Managers Index Moves into Contraction Territory

After several months of incremental declines that nonetheless reflected continued growth in manufacturing, the Institute for Supply Management (ISM) monthly Purchasing Managers Index (PMI) for November slipped below the 50-point threshold, signaling that purchasing managers surveyed are beginning to see a slowdown in industrial production.

The PMI dropped to 48.6 from its 50.1 mark in October and 50.2 in September, reaching its lowest point since June 2009 and its first monthly contraction since November 2012. The New Orders Index registered 48.9, a decrease of 4 percentage points from the reading of 52.9 in October. The Production Index registered 49.2, 3.7 percentage points below the October reading of 52.9.

The Tempe, Ariz.-based ISM said the report showed factories believed their customers continued to have too many goods on hand, indicating it will take time for orders and production to stabilize. Manufacturers are also battling weak global demand, an appreciating dollar and less capital spending in the energy sector.

Ten of the 18 industries surveyed by the purchasing managers’ group shrank, including apparel, plastics and machinery. Five industries posted growth: Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment.

The U.S. ISM group’s production measure dropped to 49.2 from 52.9 in October. New orders fell to 48.9 in November from 52.9. Both guages were the weakest since August 2012. The index of export orders held at 47.5 in November, the sixth month of contraction.