Manufacturing Index at Lowest Point in 26 Years

Dec. 1, 2008
Key demand drivers for manufacturing growth, exports and business investment, are weakening significantly.

The Manufacturing ISM Report On Business disclosed that the manufacturing sector failed to grow in November for the fourth consecutive month, and the overall economy contracted for the second consecutive month. The PMI registered 36.2%, 2.7 percentage points lower than the 38.9% reported in October. This is the lowest reading since May 1982 when the PMI registered 35.5%.

"The fall in the November Institute of Supply Management (ISM) Index to its lowest level since May 1982 indicates that the rapidly declining U.S. and global economies have created a deep and worrisome slump in the U.S. manufacturing sector," said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI. "The 12th consecutive decline in new orders to the lowest level since June 1980 reflects that fact that the key demand drivers for manufacturing growth, exports and business investment, are weakening significantly. And, even more disconcerting, the accelerated decline in the backlog of orders in all industries with the exception of apparel suggests that the near-term outlook for manufacturing production is growing weaker.

"The only positive in the ISM report is the much-improved picture for oil and other key input prices, which has been a principle difficulty for manufacturers during recent years," he added. "But the macroeconomic situation affecting the outlook for the U.S. factory sector suggests that much now depends on the capacity of central banks and governments to implement effective counter-cyclical policies."

The New Orders Index registered 27.9% in November, 4.3 percentage points lower than the 32.2% registered in October.

The Production Index decreased to 31.5% in November, a decrease of 2.6 percentage points from the 34.1% reported in October.

The Employment Index registered 34.2% in November, which is a decrease of 0.4 percentage point when compared to the 34.6% reported in October.

Manufacturers' inventories contracted in November as the Inventories Index registered 39.1%, which is 5.2 percentage points lower than the 44.3% reported in October.

The ISM Prices Index registered 25.5% in November compared to 37% in October, indicating manufacturers are paying lower prices on average when compared to October.

The Supplier Deliveries Index registered 48.4%, which is 0.8 percentage point lower than the 49.2% registered in October.

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