PMI jumps 1.6 percentage points in November
New orders climb and business expands even as tariffs, worker issues remain.
Market pressure and tariff threats have been replaced by manufacturing growth and lower material prices, as the monthly PMI index rose 1.6 percentage points in November to 59.3%.
The Institute for Supply Management’s (ISM) index has been solidly above the growth level of 50% for more than two years and hasn’t been below 57.3% for the last year.
The November PMI was released just as a temporary halt to new tariffs with China were announced, and after the trade agreement between the U.S., Canada and Mexico at November’s G20 Summit in Argentina. Concerns over global tariffs and worker availability have weighed down the PMI index since August, so the rebound in November was welcomed.
“Comments from the panel reflect continued expanding business strength,” said Timothy R. Fiore, chairman of the ISM Manufacturing Business Survey Committee, in a press release. “Demand remains strong, with the New Orders Index rebounding to above 60%, the Customers’ Inventories Index declining and remaining too low, and the Backlog of Orders Index steady. Consumption strengthened, with production and employment continuing to expand, both at higher levels compared to October.”
Even the areas that have some committee members concerned now seem to be part of the index’s calculations. “Lead-time extensions continue, while steel and aluminum prices are declining,” said Fiore. “Supplier labor issues and transportation difficulties are at more manageable levels, but they continue to limit production potential.”
While the overall index climbed in November, individual committee members had concerns over the underlying issues. Among the comments:
- “Shortages, longer lead times and capacity constraints (particularly in the electronic components marketplace) and tariffs continue to strain the supply chain and disrupt normal business practices and activities.” (Computer & Electronic Products)
- “Seeing a number (of) areas of slowdown that are concerning: truck market loosening. ISO depots full of empty containers. All signs of decreasing business activity.” (Chemical Products)
- “Production continues at increased levels.” (Transportation Equipment)
- “Labor shortages in our area are affecting production volumes.” (Food, Beverage & Tobacco Products)
- “Trade tariffs and commodity increases have greatly affected our ability to remain competitive in the market.” (Machinery)
- “Business steady. Many customers (moving) orders up due to price increases (from commodity costs and tariffs).” (Furniture & Related Products)
- “Business remains strong. Tariffs impact is fully reflected in Q3 results, and initiatives are underway to move work out of China into other low-cost countries.” (Miscellaneous Manufacturing)
- “A lack of experienced workers is having an impact on production, which impacts sourcing due to the skills gap in the manufacturing trades; particularly computer numeric controlled machinists, but also assemblers and welders. The challenge is meeting customer-delivery requirements for new and repaired equipment.” (Fabricated Metal Products)
- “Steel tariffs continue to put upward pressure on downstream materials (even when sourcing steel domestically). Long-haul trucking market seems to be normalizing after the implementation of the electronic logging requirements. Oil volatility is also beginning to make its way through downstream materials.” (Petroleum & Coal Products)
- “Continuing to increase imports in order to receive material in by the end of the year to avoid potential 25-percent tariffs.” (Nonmetallic Mineral Products)
November marked 27 straight months of manufacturing growth for the PMI, and the index remained above the 43.2% level that indicates overall economic growth in the U.S. The index has been above that level for more than nine years.