U.S. ISM manufacturing index rises in November

The U.S. Institute for Supply Management manufacturing index rose in the month of November, in contrast to the consensus expectations of a decline. The ISM manufacturing index rose to 59.3, while markets had anticipated a drop to 57.6 from October’s 57.7 print. Supplier deliveries were the only exception to have recorded a decline, having fallen for two straight months. The main subcomponents of the index rose in November. New orders rose 4.7 points to 62.1, while inventories rose 2.2 points to 52.9. Employments rose 1.6 points to 58.4. The rise in production was slightly subdued, rising only 0.7 to 60.6.

The trade components of the report continued to be greatly unchanged. New export orders remained at 52.2, while imports dropped to 53.6. These levels continue to be below those seen at the time the U.S. administration levied tariffs on steel and aluminium imports this past March, noted TD Economics in a research report.

The drop in prices paid index fell 10.9 points to 60.7, implying that prices are still rising but at the slowest rate since June 2017. The reduction showed declines in some aluminium steel, and copper commodities, while freight prices were cited as easing as well. Out of 18 manufacturing industries, 13 recorded growth in November. Three industries saw contraction.

Today’s report affirms that the U.S. manufacturing sector continues to grow at a sound pace. However, comments by survey respondents imply that things might not be as hot as the numbers imply, said TD Economics. Capacity constraints and component shortages continue to be so, as do labor shortages. Import tariffs continue to be a top concern, with some respondents citing price pressures impacting competitiveness and leading to a build-up in inventory in order to get ahead of possible rise in Chinese import tariffs on January 1st.

“Although easing freight costs are welcome by many, it appears to be driven by slowing demand and not an improvement in supply, a further sign that perhaps demand is softening. In addition to concerns about slowing domestic demand, U.S. manufacturers have to contend with weaker foreign demand”, said TD Economics.

Even if the deal between the U.S. and China at the G20 meeting this weekend might stimulate near-term sentiment, softer foreign demand and the high U.S. dollar are factors that are expected to continue to be a drag on demand for U.S. manufactured goods in the coming months, added TD Economics.

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