By Lucia Mutikani
WASHINGTON (Reuters) -U.S. manufacturing contracted at a moderate pace in November, with orders growing for the first time in eight months and factories facing significantly lower prices for inputs.
The improvement reported by the Institute for Supply Management (ISM) on Monday tracked similar increases in other sentiment surveys, which have risen on hopes of more business-friendly policies from the incoming Trump administration.
Still, manufacturing is not out of the woods yet. ISM Manufacturing Business Survey Committee Chair Timothy Fiore noted that “production execution eased in November, consistent with demand sluggishness and weak backlogs,” and that “suppliers continue to have capacity, with lead times improving but some product shortages reappearing.” Economists agreed.
“It is worth noting that in the aftermath of the 2016 election, the ISM index rose for four straight months, as business optimism swelled,” said Stephen Stanley, chief U.S. economist at Santander (BME:) U.S. Capital Markets. “I would not be surprised to see a similar dynamic this time, though in the current case, the underlying fundamentals for the factory sector have been tepid at best for a while.”
The ISM said its manufacturing PMI rose to a five-month high of 48.4 from 46.5 in October, which was the lowest level since July 2023. A PMI reading below 50 indicates contraction in the manufacturing sector, which accounts for 10.3% of the economy.
Economists polled by Reuters had forecast a PMI of 47.5. November marked the eighth straight month that the PMI stayed below the 50 threshold, but above the 42.5 level that the ISM says over time generally indicates an expansion of the overall economy.
Only three industries, including computer and electronic as well as electrical equipment, appliances and components reported growth. Among the 11 industries reporting contraction were transportation equipment, machinery, miscellaneous manufacturing, chemical products and primary metals.
Comments from manufacturers were downbeat. Makers of transportation equipment reported that “business remains slow,” and anticipated “the first half of 2025 will be similar.”
Some machinery manufacturers said a slowdown in construction “has created a surplus of finished goods, creating the need for an extra two weeks of shutdown over the Christmas holiday period.” Fabricated metal products makers said customers were destocking, adding “the preliminary forecast for 2025 is down…
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