Manufacturing ISM Contracts---------Lowest Reading Since June 2009

After flirting with contraction for three months, the Manufacturing ISM fell into negative territory with a 48.6 reading, below the lowest Econoday estimate of 49.7. The Econoday Consensus guess was 50.5, an improvement over the October reading of 50.1

After skirting right at the breakeven 50 line since September, ISM's manufacturing index broke below in November to 48.6 which is more than 1 point below Econoday's low-end estimate for the lowest reading since June 2009. The decline includes a significant dip for new orders which are down 4.0 points to 48.9 and the lowest reading since August 2012. At 43.0, backlog orders are in a six-month streak of contraction. With orders down, ISM's sample cut back on production, down nearly 4 points to 49.2, and cut back on inventories, down 3.5 points to 43.0. Employment firmed but remains soft at 51.3.

A convincing detail in the report is the breadth of weakness with only five of 18 industries reporting composite growth in the month. Transportation equipment, getting a boost no doubt from aircraft and motor vehicles, is among those in the plus column while the negative column includes petroleum as well as a number of capital goods industries including machinery, primary metals, and fabricated metals. Weakness in these industries points to weakness in business expectations.

Exports have been the Achilles heal [heel] of the factory sector all year. New export orders in this report held steady at 47.5 for the sixth straight sub-50 reading. Another weak detail is a second month of contraction for import orders (49.0) which are suffering their worst run in four years. Prices paid remains in deep contraction at 35.5.

Glimmers of Hope Extinguished

The ISM index came in at 50.2 last month, vs. a consensus estimate of 50.0, providing economists with glimmers of hope.

Economists then did what they normally do, which is take the prior reading and expect the next month to be better, explaining this month's consensus guess of 50.5.

ISM 2007-2015

That was the lowest reading since June 2009. But don't worry, there's no recession warning here, just glimmers of hope.

And with that hope, let's further dive into the numbers straight from the ISM Report.

Index Nov Oct PP Change Direction Rate of Change Trend in Months
PMI® 48.6 50.1 -1.5 Contracting From Growing 1
New Orders 48.9 52.9 -4.0 Contracting From Growing 1
Production 49.2 52.9 -3.7 Contracting From Growing 1
Employment 51.3 47.6 +3.7 Growing From Contracting 1
Supplier Deliveries 50.6 50.4 +0.2 Slowing Faster 4
Inventories 43.0 46.5 -3.5 Contracting Faster 5
Customers' Inventories 50.5 51.0 -0.5 Too High Slower 4
Prices 35.5 39.0 -3.5 Decreasing Faster 13
Backlog of Orders 43.0 42.5 +0.5 Contracting Slower 6
Exports 47.5 47.5 +0.0 Contracting Same 6
Imports 49.0 47.0 +2.0 Contracting Slower 2

Key Points

  • New orders, production, PMI Index in contraction
  • Backlog of orders in contraction 6 months
  • Exports in contraction 6 months
  • Prices in contraction 13 months

There's nothing in the ISM report to make the Fed want to hike, but the Fed will do what they want.

Mike "Mish" Shedlock

David Stockman's Contra Corner is the only place where mainstream delusions and cant about the Warfare State, the Bailout State, Bubble Finance and Beltway Banditry are ripped, refuted and rebuked. Subscribe now to receive David Stockman’s latest posts by email each day as well as his model portfolio, Lee Adler’s Daily Data Dive and David’s personally curated insights and analysis from leading contrarian thinkers.

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