Economic activity in the manufacturing sector contracted in November for the ninth consecutive month, following a two-month expansion, after 26 straight months of contraction, according to the nation’s supply executives in the latest Institute for Supply Management (ISM) Manufacturing PMI Report.

“The Manufacturing PMI registered 48.2 percent in November, a 0.5-percentage point decrease compared to the reading of 48.7 percent in October,” shared Susan Spence, MBA, and chair of the ISM Manufacturing Business Survey Committee. “The overall economy continued in expansion for the 67th month after one month of contraction in April 2020.”

Spence noted that a Manufacturing PMI above 42.3 percent over time generally indicates an expansion of the overall economy. Her summary of the latest report indicates that:

  • The New Orders Index contracted for a third straight month in November, following one month of growth; the figure of 47.4 percent is 2 percentage points lower than the 49.4 percent recorded in October.
  • The November reading of the Production Index (51.4 percent) is 3.2 percentage points higher than October’s figure of 48.2 percent.
  • The Prices Index remained in expansion (or ‘increasing’ territory), registering 58.5 percent, up 0.5 percentage points from the 58 percent reported in October.
  • The Backlog of Orders Index registered 44 percent, down 3.9 percentage points compared to the 47.9 percent recorded in October.
  • The Employment Index registered 44 percent, down 2 percentage points from October’s figure of 46 percent.
  • The Inventories Index registered 48.9 percent, up 3.1 percentage points compared to October’s reading of 45.8 percent.
  • The New Export Orders Index reading of 46.2 percent is 1.7 percentage points higher than the reading of 44.5 percent registered in October.
  • The Imports Index registered 48.9 percent, 3.5 percentage points higher than October’s reading of 45.4 percent.

“The Supplier Deliveries Index indicated faster delivery performance after three consecutive (and 14 of the previous 16) months in ‘slower’ territory,” she added. ” The reading of 49.3 percent is down 4.9 percentage points from the 54.2 percent recorded in October,” again noting that the Supplier Deliveries index is the only ISM PMI Reports index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.

“In November, U.S. manufacturing activity contracted at a faster rate, with pullbacks in supplier deliveries, new orders and employment leading to the 0.5-percentage point decrease of the Manufacturing PMI,” Spence said. “Continuing a recent trend, a previous month’s improvement in one index was evident in another gauge. After new orders strengthened in August, production improved in September. An improvement in the Backlog of Orders Index in October transferred to the Production Index, which expanded in November (as backlogs pulled back).”

Still, she also noted that the New Orders and Employment indexes both dipped 2 percentage points, underscoring the ongoing economic uncertainty.

“Decreases in two of the four demand indicators (Backlog of Orders and New Orders) overwhelmed the gains posted by the New Export Orders and Customers’ Inventories indexes,” Spence explained. “The Customers’ Inventories Index contracted at a slower rate.”

She added that a ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.”

On the Outputs side, Production reportedly entered expansion mode, but Employment contracted at a faster pace, with 67 percent of panelists (the same as October) indicating that managing headcounts is still the norm at their companies rather than hiring.

Inputs (defined as supplier deliveries, inventories, prices, and imports) were said to be mixed, with the Supplier Deliveries Index indicating faster deliveries, the Inventories Index contracting at a slower rate, and the Prices Index continuing to reflect increases. The Imports Index contracted at a slower rate.

“Looking at the manufacturing economy, 58 percent of the sector’s gross domestic product (GDP) contracted in November, matching the previous month’s figure, and the percentage of GDP in strong contraction (registering a composite PMI of 45 percent or lower) decreased slightly, at 39 percent compared to 41 percent in October. The share of sector GDP with a PMI at/or below 45 percent is a good metric for gauging overall manufacturing weakness. Of the six largest manufacturing industries, three (Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery) expanded in November,” said Spence.

The four manufacturing industries reporting growth in November included:

  1. Computer & Electronic Products
  2. Food, Beverage & Tobacco Products
  3. Miscellaneous Manufacturing
  4. Machinery

The 10 industries reporting contraction in November were:

  1. Apparel, Leather and Allied Products
  2. Wood and Paper Products
  3. Textile Mills
  4. Fabricated Metal Products
  5. Petroleum and Coal Products
  6. Chemical Products
  7. Nonmetallic Mineral Products
  8. Furniture and Related Products
  9. Transportation Equipment
  10. Plastics and Rubber Products

Survey Respondents Share Feedback

  • “New order entries are within the forecast. We have increased requests from customers to get their orders sooner. Transit time on imports seems to be longer.” (Machinery)
  • “We are starting to institute more permanent changes due to the tariff environment. This includes reduction of staff, new guidance to shareholders, and development of additional offshore manufacturing that would have otherwise been for U.S. export.” (Transportation Equipment)
  • “Tariffs and economic uncertainty continue to weigh on demand for adhesives and sealants, which are primarily used in building construction.” (Chemical Products)
  • “No major changes at this time, but going into 2026, we expect to see big changes with cash flow and employee head count. The company has sold off a big part of the business that generated free cash while offering voluntary severance packages to anyone.” (Petroleum & Coal Products)
  • “Business conditions remain soft as a result of higher costs from tariffs, the government shutdown, and increased global uncertainty.” (Miscellaneous Manufacturing)
  • “The unstable market has made pricing fluctuate in a very volatile way; I have had to reduce suppliers for raw materials to maintain a better direct cost structure. Reducing my suppliers has reduced the availability of some items and created longer lead times.” (Fabricated Metal Products)
  • “Business continues to be a struggle regarding long-term sourcing decisions based on tariffs and landing costs. External (or international) sourcing remains the lowest-cost solution compared to U.S. production/manufacturing. The delta is smaller now, reducing margins.” (Computer & Electronic Products)
  • “The government shutdown has impacted our access to agricultural data, impacting agricultural markets and, as a result, decisions we make. Optimism for a tariff exemption on palm oil percolated but hasn’t come to fruition at this time.” (Food, Beverage & Tobacco Products)
  • “Trade confusion. At any given point, trade with our international partners is clouded and difficult. Suppliers are finding more and more errors when attempting to export to the U.S. — before I even have the opportunity to import. Freight organizations are also having difficulties overseas, contending with changing regulations and uncertainty. Conditions are more trying than during the coronavirus pandemic in terms of supply chain uncertainty.” (Electrical Equipment, Appliances & Components)
  • “Domestic and export business have been lackluster. Our customers are taking prompt orders only and still don’t have confidence to build inventory, much less make expansion plans. In fact, most of any kind of ‘planning’ has been undermined by unpredictability due to inconsistent messaging from Washington. Artificial intelligence is in its infancy stages, producing confusing and most often inaccurate information. This also causes apprehensive consumer buying patterns, contributing to the challenge of forecasting demand.” (Wood Products)

Methodology: “The ISM Manufacturing PMI Report is based on data compiled from purchasing and supply executives nationwide. The composition of the Manufacturing Business Survey Panel is stratified according to the North American Industry Classification System (NAICS) and each of the following NAICS-based industries’ contribution to gross domestic product (GDP): Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies). The data are weighted based on each industry’s contribution to GDP. According to U.S. Bureau of Economic Analysis (BEA) estimates (the average of the fourth quarter 2023 GDP estimate and the GDP estimates for first, second, and third quarter 2024, as released on December 19, 2024), the six largest manufacturing industries are: Chemical Products; Transportation Equipment; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; and Petroleum & Coal Products.”

Image courtesy Parkdale Mills