US Manufacturing Output Tops Forecasts In November: Is The Sector's Crisis Over?

The U.S. manufacturing sector showed signs of improvement in November, yet it failed to avoid another month of contractionary conditions.

The Manufacturing Purchasing Managers’ Index (PMI) rose from October’s 46.5% to 48.4% in November, exceeding analyst expectations of 47.5%, as tracked by TradingEconomics.

November’s ISM Manufacturing PMI: Key Highlights

Despite the improvement, the PMI data released Monday by the Institute for Supply Management (ISM) remains below the 50% threshold, signaling contraction in the manufacturing sector for the eighth consecutive month.

The outcome marks the slowest contraction in the manufacturing sector since June.

The manufacturing sector has contracted in 24 of the last 25 months. In contrast, the broader U.S. economy, supported by services, has continued to expand for the 55th month in a row.

Key components of the PMI reflected varying degrees of improvement:

• New Orders: Returned to expansion territory for the first time in eight months, rising from 47.1 in October to 50.4.
• Production: Improved slightly from 46.2 to 46.8 but remained in contraction.
• Employment: Contracted less sharply, with the index climbing from 44.4 to 48.1.
• Inventories: Rose from 42.6 to 48.1.
• Prices: Declined, with the Prices Index dropping from 54.8 to 50.3, indicating reduced price pressures.
• Supplier Deliveries: Improved, as the index fell from 52 to 48.7, suggesting faster delivery times.

"U.S. manufacturing activity contracted again in November, but at a slower rate compared to last month. Demand continues to be weak but may be moderating," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said.

Fiore highlighted positive developments in demand, noting the rebound in the New Orders Index and a moderate rise in the New Export Orders Index, which increased by 3.2 percentage points but remained in contraction. Challenges persist, as the Backlog of Orders Index dipped further into “strong contraction territory.”

"Production execution eased in November, consistent with demand sluggishness and weak backlogs," Fiore added. On the supply side, he observed improvements in lead times but cautioned about the reappearance of some product shortages.

Market Reactions

The U.S. dollar index (DXY), tracked by the Invesco DB USD Index Bullish Fund ETF UUP, surged 1% on Monday. The dollar’s rally was supported not only by the upbeat PMI report but also by growing political uncertainty in Europe, where France’s government faces a potential no-confidence vote due to budgetary pressures.

U.S. equities were mixed in early trading. The S&P 500 – tracked by SPDR S&P 500 ETF Trust SPY  edged up 0.1%, while the Dow Jones Industrial Average slipped 0.4%. Tech stocks outperformed, driving the Nasdaq 100 – tracked by Invesco QQQ Trust, Series 1 QQQ – up 1%.

In the bond market, U.S. Treasury yields rose modestly. The 10-year yield climbed by 5 basis points to 4.23%.

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