US Manufacturing Contracts for First Time Since May 2020
November 29, 2022
US manufacturing activity contracted in November for the first time since the early days of the pandemic, as output slowed amid a third consecutive month of shrinking orders.
The Institute for Supply Management’s (ISM) index of factory activity slid to 49 in November, down from 50.2 the month prior. The index has fallen in five of the past six months and now stands below 50, which indicates contraction instead of expansion. This is the first time the index has fallen into contraction territory since May 2020, when the economy was largely shut down because of the pandemic.
The ISM’s gauge of new orders also fell in November, having declined for the fifth time in six months, while the measure of customer inventories showed that stocks shrank at the slowest pace since April 2020. Order backlogs and imports also had their weakest reading in more than two years. All of this suggests slowing demand, with the ISM noting that “the November composite index reading reflects companies’ preparing for future lower output.”
On the plus side, the ISM’s measure of prices paid for materials used in the manufacturing process fell for an eighth consecutive month. Prices fell in November at the fastest pace since May 2020 in a welcome sign that goods inflation is easing and supply chains are returning to normal.