The Economy

U.S. Factory Activity Drops for 4th Straight Month

“There is nothing to point to in [the November factory activity] report that signals a bottom in domestic manufacturing."
Matthew HellerDecember 3, 2019

A closely-watched measure of U.S. factory activity contracted for a fourth straight month in November and a decline in new orders suggested the manufacturing sector’s slump is far from over.

The Institute for Supply Management said its index of national factory activity dropped 0.2 point to a reading of 48.1 last month. A reading below 50 indicates contraction in the manufacturing sector, which accounts for 11% of the U.S. economy.

Economists polled by Reuters had forecast the index rising to 49.2 in November from 48.3 in the prior month. It hit a decade low in September.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our executive readers.

The index remains above the 42.9 level, which is associated with a recession in the broader economy. But the ISM’s forward-looking new orders sub-index tumbled 1.9 points to a reading of 47.2 last month, matching July’s reading, which was the lowest since June 2012.

“There is nothing to point to in this report that signals a bottom in domestic manufacturing and the decline in new orders if anything suggests downside risk,” Andrew Hollenhorst, an economist at Citigroup, told Reuters.

The manufacturing sector has been hit by the tariff dispute between the Trump administration and China. “Global trade remains the most significant cross-industry issue,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a news release.

Among the industries the ISM surveyed, only five, including paper and computer and electronic products, reported growth last month.

A surge in October of orders for non-defense capital goods excluding aircraft had hinted at some stabilization in manufacturing activity while recession fears were also eased by a strong rebound in a proxy of business spending on equipment.

But the Federal Reserve Bank of Atlanta on Monday slashed its gross domestic product estimate for the fourth quarter to 1.3% from 1.7% on Nov. 27, citing the ISM report and a 0.8% drop in construction spending in October as investment in private projects tumbled to its lowest level in three years.

The economy grew at a 2.1% rate in the third quarter.

4 Powerful Communication Strategies for Your Next Board Meeting