Manufacturing declines for the ninth consecutive month, reports ISM

Manufacturing continued to contract in November, for the ninth consecutive month, according to the new edition of the Manufacturing Report on Business, which was issued today by the Institute for Supply Management (ISM).

The report’s benchmark reading, the PMI, registered a reading of 48.2 (a reading higher than 50 indicates growth), down 0.5% compared to October, contracting, at a faster rate, for the ninth consecutive month, with the overall economy growing, at a slower rate, for the 67^th consecutive month.

The November PMI came in 0.8% below the 12-month average of 48.2. with January’s 50.9 and July’s 48.0 marking the respective high and low readings for that period.

ISM reported that four manufacturing sectors saw growth in November, including Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Machinery. Sectors seeing contraction included: Apparel, Leather & Allied Products; Wood Products; Paper Products; Textile Mills; Fabricated Metal Products; Petroleum & Coal Products; Chemical Products; Nonmetallic Mineral Products; Furniture & Related Products; Transportation Equipment; and Plastics & Rubber Products.

ISM cited the following for the report’s key metrics in November:

• New Orders, at 47.4, fell 2.0%, contracting, at a faster rate, for the third consecutive month, with the metric not seeing consistent growth since a 24-month stretch of growth ended in May 2022, with seven sectors reporting growth;
• Production, at 51.4, rose 3.2%, after contracting in October, with seven sectors growing;
• Employment, at 44.0, fell 2.0%, contracting, at a faster rate, for the 10^th consecutive month, with two sectors reporting growth;
• Supplier Deliveries, at 49.3 (a reading of 50 indicates slower deliveries), came in faster after slowing, at a faster rate, for the third consecutive month in October, with five sectors reporting slower deliveries;
• Inventories, at 48.9, were up 3.1%, contracting, at a slower rate, for the seventh consecutive month, with five sectors reporting higher inventories;
• Customers’ Inventories, at 44.7, were up 0.8%, coming in too low, at a slower rate, for the 14^th consecutive month, with one sector reporting inventories as too high; and
• Prices, at 58.5, up 0.5%, increasing, at a faster rate, for the 14^th consecutive month, with 12 sectors reporting pricing gains

Tariffs and the economy were once again the main themes cited in ISM panelist comments.

“Trade confusion. At any given point, trade with our international partners is clouded and difficult,” said an Electrical Equipment, Appliances & Components panelist. “Suppliers are finding more and more errors when attempting to export to the U.S. — before I even have the opportunity to import. Freight organizations are also having difficulties overseas, contending with changing regulations and uncertainty. Conditions are more trying than during the coronavirus pandemic in terms of supply chain uncertainty.”

And a Computer & Electronic Products panelist said that business continues to be a struggle regarding long-term sourcing decisions based on tariffs and landing costs, while also noting that external (or international) sourcing remains the lowest-cost solution compared to U.S. production/manufacturing and also that the delta is smaller now and is reducing margins.

In an interview with LM, Susan Spence, Chair of the ISM's Manufacturing Business Survey Committee, said that a key takeaway of this report is that it included another data point in what she called a trend of one-time bubbles.

“In November, U.S. manufacturing contracted at a faster rate (due to pullbacks in supplier deliveries, new orders, and employment),” said Spence. “A few months back we saw the first big pop in new orders in a while, just like we thought would happen with the supply chain. The next month that increase moved to production, and the month after that increase moved to backlog and now, in the November report, it has moved to production. And those other indices that had the pop are losing so it is really like a wave.”

The respective November readings for lower new orders and faster supplier deliveries are serving as an indication that manufacturers’ pipelines are not flush with work, in turn wiping out the production pop, which Spence said is likely a bubble.

“I feel like this undulation in the supply chain is going to continue to happen and may be triggered by customers thinking they need to order because [activity] is so low while they wait out and see what's going to happen with the Supreme Court regarding IEEPA tariffs or what their U.S. suppliers are going to do,” she said. “I worry every month more and more about how we're giving international customers more time to go find other places to buy their stuff, because they think it is just too volatile and risky to deal with the U.S. amid this ongoing chaos. If the Supreme Court ruled against the tariffs tomorrow, would things start to get better? If you believe it would mean certainty regarding tariffs, well, there are other ways to tariff goods and products. But it's a general uncertainty of what the administration is going to do. And I'm very much not trying to be political here. Business doesn't like this uncertainty.”

With 2025 officially now in the home stretch, Spence explained it is reasonable to expect current manufacturing conditions to remain intact, with the caveat that things are very likely to remain the same into 2026.

The main reason for that, she observed, is that a growth catalyst, of sorts, to drive confidence for end users to order from U.S. companies remains missing.

“The longer that takes, the longer these companies have to go to other places to buy what they need,” said Spence. “There is an old saying, ‘money goes where it is treated well.’ When I was in the aerospace sector, we had suppliers that hiked prices on us every year because they could. If we had enough of these increases and surprises from suppliers, our companies eventually would make an investment and go develop elsewhere, because they just couldn't handle the volatility. That is what people are going to do if. If it's easily done in some categories, they'll do it, and they probably already are.”

What’s more, the ongoing trade and tariff uncertainty is ostensibly not driving manufacturers to the U.S., she said, noting that, instead, it is driving them away. Which could very well lead to a situation in which manufacturers will order the bare minimum from suppliers until it finds a new partner.

“At some point, companies will talk to their boards or upper management and tell them they can no longer handle these types of whiplash, chaotic decisions,” said Spence.