Skipping barely a beat from October, the manufacturing PMI registered a strong 58.7 in November, the Institute for Supply Management reported today, as indexes for new orders, production and employment all remained in growth territory.
The November PMI was just 0.3% lower than October and represented the 18th consecutive month of expansion in the manufacturing sector, according to ISM. Analysts had expected the manufacturing sector to cool to at least 58.0%, with some analysts predicting a further drop to 55% or less, considered a more sustainable level over a longer period. Of the 18 manufacturing industries in the survey, 14 reported growth, led by food, beverage and tobacco products.
"Order intake has been substantial, resulting in a very healthy backlog,” a machinery manufacturer told ISM. “The packaging automation requirements in the food and beverage market are robust."
ISM’s new orders index registered 66% in November, an increase of 0.2 percentage point from October’s 65.8. The 11 industries with increased orders in November were: plastics & rubber products; food, beverage & tobacco products; miscellaneous manufacturing; fabricated metal products; paper products; furniture & related products; machinery; petroleum & coal products; transportation equipment; chemical products; and electrical equipment, appliances & components.
Factories continued in high gear as the production index registered 64.4% in November, a dip of 0.4 percentage point when compared to the 64.8% reported in October, but the ninth month in a row of increased production. An index above 51.1% is generally consistent with an increase in the Federal Reserve Board’s industrial production figures, ISM noted.
Hiring in the manufacturing sector continued to show signs of improvement, with ISM’s employment index registering 54.9% in November, a decrease of 0.6 percentage point when compared to the 55.5% reported in October. This is the 17th consecutive month of growth in employment.
The inventories index in November registered 51.5%, 1 percentage point lower than the 52.5% registered the previous month, indicating continuing growth in raw materials inventories.
The prices index registered 44.5% in November, a drop of 9 percentage points compared to October, as a quarter of supply executives reported paying lower prices for raw materials. This was the first drop in raw materials prices since July 2013, ISM noted.
"The decline in the prices paid subcomponent reflects lower commodity prices, particularly the spectacular drop in oil prices," said Ksenia Bushmeneva, an economist with TD Economics. "As long as global growth does not decelerate further, lower energy costs will be beneficial to manufacturers, particularly in energy-intensive industries such as chemicals and metals manufacturing."
Despite concerns about the global economy, ISM’s new export orders index registered 55% in November, 3.5 percentage points higher than the 51.5% reported in October.
“The November ISM report is a very positive sign that the economic expansion is fundamentally solid because the manufacturing base is growing,” Daniel Meckstroth, chief economist for the MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation, commented. ”We expect consumer-driven manufacturing to provide a solid base for manufacturing production growth that will be enhanced by strong business equipment spending and a rebound in material manufacturing. The MAPI Foundation predicts that manufacturing industrial production will grow 3.5% in 2015 and 3.9% in 2016. The expected pace of growth is faster than the growth rate of the overall economy.”