The Chicago Business Barometer from ISM-Chicago rose from 58.4 in October to 62.6 in November, reversing the slight decrease last month. It was its highest level since April. Production and new orders were areas of strength, with index readings of 67.3 and 70.2, respectively.
Pricing pressures – while continuing to expand – are at their lowest level in 14 months. The index representing the prices paid for raw materials has fallen from 81.8 in April to 66.0 in October to 60.2 in November. This is obviously encouraging, especially as elevated prices have been a top concern for manufacturers for much of the past year.
Employment and inventories continued to grow, but at a slower pace. The index for employment, for instance, fell from 62.3 to 56.9. This suggests that job growth has still not caught up with increased manufacturing activity, but hopefully, that will change soon.
The ADP employment report released earlier today found that manufacturers began hiring again after a few months of negative or no growth.
In other news, the Bureau of Labor Statistics released revised productivity data for the third quarter of 2011. While slightly lower than previous estimates, the basic story remains the same. Manufacturers experienced 5 percent growth in productivity in the third quarter, with the durable goods sector up 9.5 percent. The result is a substantial reduction in unit labor costs for manufacturers, down 5.1 percent.
Lower manufacturing costs have helped to keep the sector competitive globally, and the third quarter numbers reflect a return to that trend after weaker growth in the second quarter.
Overall labor productivity grew 2.3 percent in the third quarter, which was revised down from the 2.4 percent growth rate estimated earlier in the month.
Chad Moutray is chief economist, National Association of Manufacturers.