ISM Manufacturing Contracts for the 35th Time in 37 Months
The latest ISM report confirms that the long-running slump in US manufacturing is nowhere near ending. November’s PMI reading of 48.2 per cent, down from 48.7 per cent in October, marks a ninth successive month of contraction. More telling is the broader trend: the sector has now contracted in 35 of the past 37 months, an extraordinary stretch of weakness for an economy that continues to post respectable headline growth. Aside from a fleeting two-month rebound earlier this year, the industrial side of the economy has been sliding since late 2022.
A closer look at the survey reveals how persistent the pressure has become. New orders fell again to 47.4 per cent, signalling a continuing decline in demand. Production rose to 51.4 per cent, but the uptick is misleading. Factories are sustaining output by working through older orders rather than responding to renewed activity. The Backlog of Orders Index dropped sharply to 44.0 per cent, underlining how dependent current production is on clearing past commitments. With order books thinning, this support will fade.
Labour conditions remain weak. The ISM employment index slipped further to 44.0 per cent, consistent with ongoing job losses and an industry no longer inclined to hire. Respondents noted that natural attrition is being allowed to run rather than being offset with new recruitment. The backdrop is already softening: the national unemployment rate has risen to 4.5 per cent, the highest in three years, and the number of people unemployed for more than 15 weeks is now at its largest since late 2021. Manufacturing is usually the first part of the economy to show strain; the broader labour market is starting to echo that signal.
Input costs are adding to the discomfort. The Prices Index rose to 58.5 per cent in November, indicating renewed margin pressure. Manufacturers are paying more for inputs even as demand weakens, a combination that leaves them cutting costs where they can and avoiding discretionary spending. It also complicates the Federal Reserve’s position. Weak activity would normally warrant interest-rate cuts, but persistent cost pressures limit the central bank’s freedom to act quickly.
The downturn stretches across most major industries. Only Computer and Electronic Products, Food and Beverage, and Machinery reported growth in November, and even these showed signs of fragility. Transportation Equipment firms spoke of permanent adjustments in response to tariffs, including shifting production offshore. Chemical Products manufacturers cited softening demand, while Machinery producers reported longer delivery times for imported components. Across the survey, firms described an environment of caution and delayed investment.
What keeps headline GDP growth buoyant is fiscal policy. A sizeable federal budget deficit is providing enough demand to hold overall output steady, masking the weakness visible in factory activity, goods consumption and labour-market momentum. Strip away that support and the slowdown in underlying demand looks far more pronounced.
The November ISM report offers little indication that a turning point is near. New orders are falling, backlogs are shrinking, employment is weakening, and costs remain firm. After nearly three years of decline, the industrial recession has become a structural drag on the US economy. The “35 out of 37 months” statistic is not merely a curiosity; it encapsulates a sector that has lost momentum and shows few signs of regaining it.
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