The ISM manufacturing index fell to 48.6 in November, marking the first outright contraction in national manufacturing activity in three years. Economists and the consensus had looked for a slight increase to 50.5, as several regional surveys reported gains in supplier deliveries and employment on the month. Those components did print higher in November with supplier deliveries at 50.6 (previous: 50.4) and employment at 51.3 (previous: 47.6); however, these modest increases were not enough to offset large declines in production (49.2, previous: 52.9) and new orders (48.9, previous: 52.9).
New export orders was unchanged at 47.5, implying that the international environment and strength of the dollar continue to pose headwinds for manufacturing demand. Elsewhere, a sharp decline in the inventories index (43.0, previous: 46.5) may signal that the drag on Q3 GDP growth from slower inventory stocking will continue into Q4.
"We believe the November ISM results suggest that the tentative stabilization in some manufacturing indicators over the past two months was indeed temporary, and the US manufacturing sector likely faces another leg down", says Barclays.
