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In November, the U.S. manufacturing sector contracted for the ninth consecutive month and at a faster pace than the prior month, with the ISM Manufacturing^® PMI decreasing to 48.2% from 48.7% in October. Two of the four demand indicators improved in November, with the New Export Orders and Customers’ Inventories Indexes rising to 46.2% and 44.7%, respectively. Meanwhile, the New Orders and Backlog of Orders Indexes contracted at faster rates. On the other hand, the Production Index returned to growth after contracting in October, increasing from 48.2% to 51.4%. 

The New Orders Index contracted for the third consecutive month and at a faster rate, falling 2.0 percentage points from October. The index hasn’t shown consistent growth since a 24-month streak of expansion ended in May 2022. Of the six-largest manufacturing sectors, three—computer and electronic products; machinery; and food, beverage and tobacco products—reported an increase in new orders. Respondents continued to note concern about near-term demand, primarily driven by tariff costs and uncertainty.

The New Export Orders Index contracted for the ninth consecutive month but at a slower pace, 1.7 percentage points higher than October. The continued contraction is likely indicative of dampened demand amid ongoing trade tensions and policy uncertainty. Meanwhile, the Imports Index contracted for the eighth consecutive month but at a slightly slower rate, up 3.5 percentage points to 48.9% in November. Imports continued to contract as a result of tariff pricing and weaker demand compared to prior months.

The Employment Index contracted for the 10th consecutive month and at a faster pace than the prior month, down 2.0 percentage points from October to 44%. Of the six-largest manufacturing sectors, two—computer and electronic products and machinery—reported increased employment. Companies continued to focus on layoffs and attrition to restrict headcounts due to uncertainty around near- to mid-term demand. For every comment on hiring, 3.4 respondents noted reduced headcounts.

The Prices Index increased 0.5 percentage points to 58.5%, indicating raw materials prices grew for the 14th straight month in November, and at a faster pace. Of the six-largest manufacturing sectors, five—machinery; computer and electronic products; transportation equipment; chemical products; and food, beverage and tobacco products—reported increased prices. The increase continues to be driven by higher steel and aluminum prices impacting the entire supply chain, as well as the tariffs applied to most imported goods. Roughly 27.2% of companies reported paying higher prices, slightly down from 27.3% in October but still up from 21% in January.