Manufacturing Sector Contracts in November 2012 - Modern Distribution Management

Manufacturing Sector Contracts in November 2012

Contraction reflects concerns over fiscal cliff, slowdown in demand in second half of year.

The manufacturing sector contracted in November, following two months of modest expansion, according to the latest Manufacturing Report on Business from the Institute for Supply Management.

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The Purchasing Managers Index registered 49.5 percent, a decrease of 2.2 percentage points from October’s reading of 51.7 percent, indicated contraction for the fourth time in the past six months.

The reading was the lowest level since July 2009 when the PMI registered 49.2 percent.

However, the other indices were still positive, especially in new orders and production, but still reflect concern over the fiscal cliff issue in Washington.

The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating growth in new orders for the third consecutive month. The Production Index registered 53.7 percent, an increase of 1.3 percentage points, indicating growth in production for the second consecutive month.

The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index's lowest reading since September 2009 when the Employment Index registered 47.8 percent. The Prices Index registered 52.5 percent, reflecting a decrease of 2.5 percentage points.

Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand.

Of the 18 manufacturing industries, six are reporting growth in November in the following order: Petroleum & Coal Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The 11 industries reporting contraction in November – listed in order – are: Apparel, Leather & Allied Products; Wood Products; Primary Metals; Transportation Equipment; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; and Printing & Related Support Activities.

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