– December 1, 2017
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The Manufacturing Purchasing Manager’s Index registered a 58.2 reading in November, down from 58.7 in October. However, the new-orders index and the production index posted gains. The PMI and most of the components remain at solidly favorable levels despite mixed results in the latest month.

For this index, 50 is neutral, with readings above 50 suggesting expansion in manufacturing and readings below 50 suggesting contraction. Typically, the PMI ranges between 45 and 65. Historically, readings above 43.3 suggest expansion for the overall economy. November is the 102nd month above 43.3 and the 15th consecutive month above 50.

Among the key components of the PMI, the new-orders index came in at 64.0, up from 63.4 in October. November was the 15th month of readings above 50. A new-orders index above 60 is strong by historical measures, and November marks the 6th month in a row, and the 10th month in the past 12, that new orders have been above 60.

The production index was 63.9 in November, the highest result since March 2011. November marks the 15th month above 50 and the 6th month above 60. Historically, readings above 51.4 are consistent with growth in the industrial-production index from the Fed. In November, 14 industries reported growth while none reported a decrease in production.

The employment index fell to 59.7 in November, down from 59.8 in October. The slightly lower but still favorable reading suggests employment in manufacturing likely increased in November. Over the last four months, the employment index has averaged 60, the best four-month run since 2011. The Bureau of Labor Statistics will be releasing the employment-situation report for November on Friday, December 8.

The one component that raises some concern is the price index. Though it fell 3 points in November to 65.5, the index has been trending higher for the past two years, with the 12-month average hitting 65.5, its highest since 2011. This result suggests manufacturers are experiencing materials-costs increases.

Supplier deliveries, a measure of delivery times for suppliers to manufacturers, came in at 56.5, down from 61.4 in October. It suggests suppliers are falling farther behind in delivering supplies to manufacturers, but the pace has slowed a bit from the prior month.

Today’s report from the ISM suggests the manufacturing sector continued to grow in November, though the pace eased slightly. Strong readings for new orders and production are particularly favorable, suggesting a positive outlook for manufacturing, while the strong performance of the employment index suggests continued gains in the labor market. Those results are in line with other data recently that point to ongoing expansion for the overall economy.

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Robert Hughes

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Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
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