The Institute for Supply Management (ISM) Purchasing Managers Index (PMI) rose from 50.8 in October to 52.7 in November. This is the highest figure since June, and the PMI indicates that the manufacturing sector has grown for 30 consecutive months.
New orders and production grew faster than last month, with the indices for both up to 56.7 (from 50.1) and 56.6 (from 52.4), respectively. Exports grew in November, following a month where they were unchanged. Job growth grew at a slower pace; the index for manufacturing employment fell from 53.5 to 51.8.
Customer inventories, which have contracted for every month since March 2009, moved to an unchanged stance this month. The backlog of orders continued to contract for the sixth straight month.
Pricing pressures continue to ease. The prices paid for raw materials contracted for the second straight month. Its index was 45.0 – a far cry from the 85.5 recorded in April when rising energy and raw material prices were at the forefront of everyone’s minds.
There was one area of weakness. Suppliers have slowed down their delivery times from a marginally faster index reading in October of 51.3 to the just-below-unchanged figure of 49.9 in November.
Overall, today’s ISM numbers find that the manufacturing sector is continuing to improve after a rough few months. The stronger orders, production and export numbers help underlie why manufacturers have become more confident recently and why they are generally more upbeat about future activity.
It is important to recognize that significant headwinds exist that might derail such positivity, and the November Purchasing Managers’ Index is still below where it was earlier in the year. While the sector continues to expand, we remain in cautiously optimistic territory.
Chad Moutray is chief economist, National Association of Manufacturers.
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