ISM Manufacturing: 8 of Last 9 Months in  Expansion Territory

December 1, 2016
Bottom Line: Manufacturing activity expanded in November for the 8th time in the last 9 months. Anecdotal evidence from the survey suggest positive outlooks across most industries (see quotes below). Comments cite increasing demand, some tightness in labor markets and plans to reduce inventory by year-end. The differential between new orders and inventory levels declined but is still positive, suggesting manufacturing activity levels will continue to stay in expansionary territory (above 50 on headline ISM) over the coming months. The employment component fell slightly but the level continues to indicate that employment in the manufacturing sector is growing and was modestly above the average survey level for the last twelve months. The ISM Manufacturing Index ROSE by 1.3 points in November to 53.2%, compared with market expectations for a smaller decline to a 52.5%. This indicates that manufacturing activity expanded modestly during the month. New Orders grew slightly from 52.1% to 53.0%. Meanwhile, Export Orders declined slightly. Production grew modestly from 54.6% to 56.0%. Consequently, Order Backlogs declined slightly. Inventories grew modestly from 47.5% to 49.0%. They are modestly above the average survey level for the last twelve months. Employment declined slightly from 52.9% to 52.3%, suggesting there will be modest factory job creation in the upcoming payroll employment report. Prices were unchanged.

Quotes from Survey:

"Strong manufacturing numbers in anticipation of strong year-end bookings." (Computer & Electronic Products) "Business is still steady. We are foregoing our shutdown over Christmas break due to an increase in customer orders." (Plastics & Rubber Products) "New spec buildings going up in our area. Local companies adding additional production space which equates to higher employment." (Machinery) "2017 is looking to be a very busy year." (Fabricated Metal Products)