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Apparel Bucks First Production Falloff Since May 2020

Economic activity in the U.S. manufacturing sector contracted in November for the first time since May 2020, after 29 consecutive months of growth, the nation’s supply executives said in the latest Manufacturing Institute of Supply Management (ISM) “Report On Business.”

“The November Manufacturing PMI (Purchasing Managers’ Index) registered 49 percent, 1.2 percentage points lower than the 50.2 percent recorded in October,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

Six manufacturing industries reported growth in November, led by apparel, leather and allied products, while among the 12 industries reporting contraction were textile mills, and furniture and related products.

“The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for November corresponds to a 0.1 percent increase in real gross domestic product (GDP) on an annualized basis,” says Fiore. “The U.S. manufacturing sector dipped into contraction, with the Manufacturing PMI at its lowest level since the coronavirus pandemic recovery began. With Business Survey Committee panelists reporting softening new order rates over the previous six months, the November composite index reading reflects companies’ preparing for future lower output.”

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ISM’s New Orders Index contracted for the third consecutive month in November, registering 47.2 percent, a decrease of 2 percent compared to October. A New Orders Index above 52.9 percent usually coincides with an increase in the Census Bureau’s series on manufacturing orders.

Of the 18 manufacturing industries, only one reported growth in new orders in November–apparel, leather and allied products, while 14 industries reported a decline.

The Production Index registered 51.5 percent in November, down 0.8 percent from October, but indicating growth for the 30th consecutive month.

The ISM Prices Index declined 3.6 percent in November to 43 percent, indicating raw materials prices decreased for the second time in 29 months. This was the index’s lowest level since a reading of 40.8 percent in May 2020.

Over the past eight months, the index has decreased 44.1 percent, including a combined 26 percent plunge in July and August. A Prices Index above 52.6 percent generally coincides with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

“Price declines continue to be driven by relaxation in energy markets, copper, steel, aluminum, plastics and corrugate, as well as volatility in freight costs,” Fiore said. “Notably, 87 percent of respondents reported paying the same or lower prices in November, compared to 80 percent in October.”

The 10 industries reporting paying decreased prices for raw materials in November were topped by textile mills and included furniture and related products. Seven industries, including apparel, leather and allied products, reported no change in prices for the month.

ISM’s Employment Index registered 48.4 percent in November, 1.6 percent lower than October. An Employment Index above 50.5 percent is usually consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

“Labor management sentiment continued to shift, with a number of panelists’ companies reducing employment levels through hiring freezes, attrition and now layoffs,” Fiore said. “In November, layoffs were mentioned in 14 percent of employment comments, up from 6 percent in October. Turnover rates remained consistent, with 30 percent of comments citing backfill and retirement issues, generally the same rate since September. For those companies expanding their workforces, comments continue to support an improving hiring environment.”

Apparel, leather and allied products led the list of seven of the 18 manufacturing industries reporting employment growth in November. The five industries reporting a decrease in employment in November were topped by textile mills, while furniture and related products were among the six industries reporting no change in employment month to month.

The delivery performance of suppliers to manufacturing organizations was faster for a second straight month in November, as the Supplier Deliveries Index registered 47.2 percent, 0.4 percent higher than October. Prior to October, the last reading under 50 percent was in February 2016. It was also the first time the index has spent consecutive months in “faster” territory since October-December 2015.

Six of 18 manufacturing industries reported slower supplier deliveries in November, topped by apparel, leather and allied products and textile mills. The 11 industries reporting faster supplier deliveries in November compared to October included furniture and related products.

The Inventories Index registered 50.9 percent in November, 1.6 percent below October. The index recorded its lowest level since July 2021, when it registered 49.1 percent. An Inventories Index greater than 44.4 percent, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.

“Panelists’ companies continue their efforts to reduce their total supply chain inventories, indicated by the contraction in new orders, slow expansion in manufacturing inventories and the ‘just right’ level of customers’ inventories,” said Fiore.

Of 18 manufacturing industries, the eight reporting contracting inventories in November included textile mills, and apparel, leather and allied products.

ISM’s Customers’ Inventories Index registered 48.7 percent in November, up 7.1 percent from October. The index recorded its highest level since April 2020, and led Fiore to conclude “the current index level is no longer providing positive support to future manufacturing expansion.”

Six industries reported customers’ inventories as too high in November, led by textile mills.

ISM’s Backlog of Orders Index registered 40 percent in November, a 5.3 percent decrease compared to October, indicating order backlogs contracted for the second consecutive month after a 27-month period of expansion

Only two industries reported growth in order backlogs in November–apparel, leather and allied products, and machinery. Twelve industries reported lower backlogs in November, including textile mills and furniture and related products.

ISM’s New Export Orders Index rose 1.9 percent to 48.4 percent in November.

“Weakness in European economies and China’s economic sluggishness, as well as the strong dollar, continued to constrain new export order activity and negatively impact new order rates,” Fiore said.

Apparel, textiles and furniture were among the 10 industries reporting no change in new export orders for the month.

ISM’s Imports Index fell 4.2 percent to 46.6 percent in November. The four industries reporting growth in imports in November were led by apparel, leather and allied product.

“The index moved into contraction in November after five months of expansion, dropping to its lowest level since May 2020,” Fiore added.