ISM: Manufacturing sector contracts for first time since 2020 after struggling | So Good News
Last month, the U.S. manufacturing economy contracted for the first time since the summer of 2020, according to the Institute for Supply Management’s latest survey. ISM’s purchasing manager’s index fell to 49.0% in November 2022, 1.2 points better than 1.2 points in October and 5.5 points better than May 2020.
The period between last month and May 2020 has been marked by strong demand for manufacturing products, which has driven nearly 30 months of continuous production growth despite the difficulty of qualifying supplies and equipment to produce them.
That demand is rising steadily. ISM’s index for new orders fell to 47.2% from 49.2, indicating faster growth. Timothy Fiore, chairman of the ISM’s manufacturing survey committee, noted that many of the demand survey indicators were down.
“The November composite index reading reflects firms’ preparations for lower output in the future,” he said, adding that new orders and new export orders fell for three and four months, respectively, in the report.
Other key indicators of manufacturing growth were mixed, but mostly negative. The employment index was unchanged in October, falling from 50% to 48.4%, making it more difficult for businesses employing workers. The manufacturing index fell slightly, but remained in growth territory, down 0.8 points to 52.3%.
In comments on the survey; Manufacturing executives echoed the survey’s findings as they relate to their own business.
“Customer demand softened, but suppliers maintained high prices and profits,” reported one computer and electronics industry executive. A leader in the electronics and appliances sector noted that lower housing prices are hurting demand. “We’re sitting on cash tied up in inventory,” they said. And one machinery executive said the slowdown in demand was linked to economic concerns.
“As we approach the end of the year, general economic uncertainty has slowed orders and many of our key customers are reducing their capital expenditures,” they said.