Today’s report on the ISM Manufacturing report for the month of November was a big disappointment as not only did the headline number miss expectations (48.6 act. vs. 50.5 est.), but it also dropped below 50 (dividing line between expansion and contraction) and fell to its lowest level since June 2009. While it should surprise no one that the manufacturing sector in the US has been struggling and is no longer the behemoth that it once was in the US economy, when you start having to go back to the last recession to finds times when any economic indicator was as bad as the current reading, it raises concerns.
The table below shows the breakdown of this month’s report by each of the ISM Manufacturing report’s components. Red dominates the list this month as just four components showed increases relative to October. On the downside, the biggest declines this month were in New Orders and Production which both dropped to their lowest level since August 2012. On the upside, employment actually saw the largest increase rising from 47.6 to 51.3. While an encouraging trend, we would note that just as we discounted the drop in this component in last month’s report as a warning sign for the October employment report, we wouldn’t read too much into the increase this month ahead of Friday’s jobs report. While the m/m readings in the ISM Manufacturing report disappointed, the y/y readings were even more negative. Of the ten subcomponents, nine declined including more than ten point declines in Production (-13.4), New Orders (-13.2), and Backlog Orders (-12.0).