“Gloomiest In A Decade” – US Manufacturing Surveys Tumble Into Contraction

Following ADP’s report of job losses in the goods-producing sector of the economy, it is perhaps no surprise that US Manufacturing surveys suggest that part of the economy is contracting.

• S&P Global US Manufacturing PMI 47.7 (Contraction) in November (final), down from 50.4 in October – the weakest level since June 2020

• US ISM Manufacturing tumbled to 49.0 (Contraction) in November, down from 50.2 in October – weakest since May 2020.

Source: Bloomberg

Under the hood, all the major ISM sub-indices contracted with prices tumbling to 43.0 and jobs and new orders falling…

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“A combination of the rising cost of living, higher interest rates and growing recession fears have led to slumping demand for goods in both the home-market and abroad. Companies are consequently cutting production at a rate not seen since the global financial crisis, if the initial pandemic lockdowns are excluded. However, even with the latest production cuts, the downturn in demand has still led to one of the largest increases in unsold stock recorded since survey data were first available 15 years ago, which suggests that companies will continue to reduce production in the coming months to bring these inventories down to more manageable levels.

“Likewise, companies are slashing their purchases of inputs and raw materials at a rate not seen outside of the pandemic since the global financial crisis.

“This slump in demand is increasingly manifesting itself in a shift from a sellers’- to a buyers’-market for a wide variety of goods, as evidenced by improving supply chains, meaning price pressures are now abating rapidly.

“While supply chain worries persist, notably in relation to China’s lockdowns, companies’ concerns are increasingly moving away from the supply side to focusing on the darkening outlook for demand, meaning the business mood remains among the gloomiest seen over the past decade.”

Manufacturing Production is set to tumble…

That should bring down inflation, right Jay?