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Report On Business® Roundup: November Manufacturing PMI®

December 02, 2024
By Dan Zeiger

Every election year, the Manufacturing ISM® Report On Business® for November is about more than current U.S. factory activity, as the data and survey comments also indicate sentiment on the recently determined balance of power in Washington.

The Manufacturing PMI® data released on Monday was no exception, as the composite index reading of 48.4 percent exceeded expectations and reflected positive vibes about business-friendly tax and regulatory policies under the incoming Donald Trump administration and both houses of Congress controlled by the Republican Party.

“The business community grabbed on to the Republican win,” Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters on Monday. “There’s going to be a bit of money put into the economy and some regulations cut. We’ll see what that does to the business environment, but overall, the panelists have perceived this to be very positive.”

The potential tariffs turbulence that defined much of the first Trump administration will be dealt with later, Fiore said, as companies are more eager to see demand return, even with higher inflation as a possible trade-off.

Throughout the campaign, Trump called “tariffs” his favorite word and proposed levies on all imported goods. Last week, he announced plans to enact 25-percent tariffs on Mexico and Canada, as well as additional levies on China — America’s three biggest trading partners — but it’s unclear whether he will follow through when he assumes office in January.

With the Joe Biden administration keeping most of the pre-2021 levies in place and adding others, tariffs have been a fact of life for companies, and they should have a playbook, Fiore said: “We’ve done this before.”

“He elaborated, “We know some brinksmanship comes into play. There’s going to be a lot of anxiety, but (manufacturers) will take a chill pill and work through it. Companies should be ready for this, and hopefully if there are tariffs (with Canada and Mexico), they’ll be short-lived.”

Noting that the Manufacturing PMI® increased for four consecutive months in the wake of Trump’s first election win — rising from 51.8 percent in October 2016 to 57.7 percent in February 2017 — Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, told Reuters that a similar expression of optimism is likely.

“I would not be surprised to see a similar dynamic this time, though in the current case, the underlying fundamentals for the factory sector have been tepid at best for a while,” he said. While that’s true, the November numbers rebounded somewhat from the previous month, when they were held down by labor turbulence and back-to-back hurricanes hitting the Southeast.

The data on demand, though indicating weakness, had rays of sunshine, as the New Orders Index registered 50.4 percent to land in expansion territory for the first time since March, and the New Export Orders Index increased 3.2 percentage points to 48.7 percent. (The New Orders Index directly factors into the PMI®; the New Export Orders Index does not.)

The Inventories Index was up 5.5 percentage points to 48.1 percent, suggesting that companies might be willing to invest in building their stock levels. The Inventories and Supplier Deliveries indexes directly factor into the PMI®, which would have been higher in November had the latter not fallen into contraction.

After four months in expansion territory, the Supplier Deliveries Index dropped to 48.7 percent, indicating faster lead times. That’s good for supply managers but not the PMI®: Supplier Deliveries is an inversed index; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.

Should the Supplier Deliveries Index return to its recent neighborhood of about 52 percent and employment stabilize, a composite index reading in expansion territory remains likely in the first quarter of 2025, Fiore said.

“In January, there are a lot of seasonal factors that come into play, which make it a little bit harder to predict,” he said. “But (conditions suggest) it will happen in the first quarter for sure. I don’t think it will be the end of the first quarter. I think we’ll see it before then.”

The Report On Business® roundup:

Barron’s: U.S. Manufacturing Activity Is Still Contracting. But There's Good News. “There was, however, one really good bit of news for investors: new orders are growing. … Stocks don’t always react to the ISM report. Still, it was better than it has been and that is good news for the manufacturing sector heading into 2025.”

Bloomberg: U.S. Factory Activity Shrinks Less Than Forecast as Orders Expand. “The advance in November left the purchasing managers gauge at the highest level since June, suggesting manufacturing is stabilizing after a two-year downturn. The (New Orders Index) climbed 3.3 (percentage) points, the most in five months and a sign of budding optimism following the presidential election.”

CNBC: ISM Manufacturing Data Beats Estimates in November With Best Level Since June. “Interesting number,” analyst Rick Santelli said. “It’s better than anticipated, sequentially higher and the best since June, but the eighth consecutive number under 50 percent. Looking at (the Prices Index), it is over 50 at 50.3 percent, but much lower than expected, which in prices paid is a good thing. It’s the lowest level since September at 48.3 percent, and that’s quite important that we’re seeing lower numbers.”

Mace News: Manufacturing in Contraction for Eighth Straight Month but Shows Signs of Pickup in Early 2025. “Concern over a possible inflationary policy stance under the Trump administration is “not going away” but firms are looking at the positive side as Republicans tend to be “business friendly,” Fiore told reporters. … Fiore repeated that the U.S. manufacturing sector is away from a serious downturn and that the November ISM report supports the path toward soft-landing amid signs of slowing but resilient employment and consumption.”

MarketWatch: U.S. Manufacturers Post Biggest Increase in Orders Since Spring, but Slump Is Not Over Yet. “The improvement in November is unlikely to be a sign of the first green shoots of an industry revival, but rather to signal a bounce back from a weak October report that was dragged down by major hurricanes and a strike at Boeing. … Manufacturers are hoping for a revival in 2025, but the incoming Trump administration’s policies could bring both pain and pleasure.”

Reuters: U.S. Manufacturing Contracts at Slow Pace; Input Price Growth Cools. “Comments from manufacturers were mostly downbeat. Makers of transportation equipment reported that business remains slow, and anticipated the first half of 2025 will be similar. … Fabricated metal products makers said customers were destocking and appear uncertain about near-term demand, adding the preliminary forecast for 2025 is down significantly.”

The Wall Street Journal: U.S. Factory Activity Contracts as Demand Remains Weak. “November’s reading was better than expectations of 47.5 percent from a consensus of economists polled by The Wall Street Journal. … However, the (New Orders Index) returned to growth, after seven months of contraction, while the (Employment Index) recovered, but was still in contraction territory.”

ISM’s Services PMI® will be unveiled on Wednesday, and the Hospital PMI® on Friday. Also, the ISM Supply Chain Planning Forecast (formerly the Semiannual Economic Forecast) for the manufacturing and services sectors will be released on December 16.

For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/Phynart Studio)

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.