US Manufacturing Stuck in Dour Mood, After the Boom Last Year

Worries abound, weakness persists, but some aspects and sectors tick up.

By Wolf Richter for WOLF STREET.

The US manufacturing sector remains in a dour mood, according to data released today from two sources, one painting a picture that is dourer than the other, but both agreeing that it’s not fun anymore after the manufacturing boom last year.

November was the fourth month in a row that manufacturing contracted, and it contracted a tad faster than in October, according to the Manufacturing ISM Report on Business, with new orders, production, employment, backlog of orders, new export orders, and inventories all contracting. The overall Purchasing Managers Index ticked down to 48.1. Values over 50 mean growth; values below 50 mean contraction (data via YCharts):

These Purchasing Managers Indices (PMIs) are private-sector measures, based on how a panel of manufacturing executives – names are not disclosed – see new orders, production, employment, etc. for their own businesses in the current month (November). PMIs are the mostly timely measure. Official data for manufacturing in November will be released in two weeks.

But preliminary official data for October, released by the Federal Reserve last month, shows that manufacturing production declined 1.5% year-over-year in October, accelerating in the wrong direction, and the biggest dip since the oil bust of 2015/2016. The index had peaked in December last year, with year-over-year growth rates peaking at 4.0% in September last year, the fastest since 2012:

So the PMI data we’re looking at today gives us a preview of what the official data, such as the manufacturing data from the Federal Reserve, might look like over the next month or two. And it’s not pretty, according to the Manufacturing ISM Report on Business:

  • Demand, in terms of new orders, contracted at a faster rate in November (47.2) than in October.
  • New export orders reverted to falling in November (48.3), after having suddenly surged to barely-growth in October (50.4) from deep gloom in September (41).
  • Production contracted, but less fast (49.1) than in October (46.2).
  • But employment skidded faster (46.6) than in October (47.7).
  • Backlog of orders fell faster (43) than in October (44.1), as manufacturers were eating into their backlogs as new orders are not coming in fast enough.
  • Prices fell for the sixth month in a row, but at a slower rate (46.7) than in October (45.5).

The executives on the panel of the Manufacturing ISM Report on Business represent 18 manufacturing industries. Of these industries, only five reported growth in November:

  • Apparel, Leather & Allied Products
  • Food, Beverage & Tobacco Products
  • Paper Products
  • Miscellaneous Manufacturing
  • Computer & Electronic Products.

The remaining 13 industries reported contracting in November, in this order:

  • Wood Products
  • Printing & Related Support Activities
  • Furniture & Related Products
  • Textile Mills;
  • Fabricated Metal Products
  • Transportation Equipment
  • Primary Metals
  • Plastics & Rubber Products
  • Petroleum & Coal Products
  • Nonmetallic Mineral Products
  • Machinery
  • Chemical Products
  • Electrical Equipment, Appliances & Components.

Less gloomy was the IHS Markit US Manufacturing PMI, also released today. In the data after the Financial Crisis, it never dipped into contraction mode in the first place (below 50), though it came close in June, July, and August 2019, and in May 2016. In November, the PMI ticked up for the third month in a row (to 52.6), indicating that “US manufacturing continues to pull out of its soft patch,” according to the report:

But IHS Markit Chief Business Economist Chris Williamson remained on the dour side:

Some caution is needed, as these improved survey numbers merely translate into very subdued growth in comparable official gauges of manufacturing production and factory payrolls. Business sentiment also remains worryingly subdued, with expectations about future output growth well down on earlier in the year and running at one of the lowest levels seen since comparable data were first available in 2012.

Firms remain very concerned about the disruptive effects of tariffs and trade wars in particular, both in terms of rising prices and weakened demand, though the survey also saw further worries among manufacturers that the economy could slow in the upcoming presidential election year as customers delay spending and investment decisions.”

Business confidence “remained historically muted,” the report found, “as global economic uncertainty continued to weigh on expectations.” But there were some bright spots:

  • New orders increased “at the fastest pace since January, reportedly buoyed by greater marketing activity and a reduction in hesitancy among customers in placing orders.”
  • Export orders increased at the fastest rate since June.
  • Employment rose at the fastest rate since March “amid reports of greater operational requirements.”

Prices – both input and output prices – rose and “inflationary pressures intensified” but was still “relatively muted,” and “others noted that increases were generally only slight overall.”  As reasons for these price increases, however feeble they may have been, executives cited “supplier shortages, tariffs and higher raw material costs.”

So this is the image we get of US manufacturing: Depending on who you ask, and depending on the segment, manufacturing remains in a mild contraction, or is starting to pull out of a “soft patch” but without conviction as worries abound. Even the ISM Manufacturing PMI, now in its fourth month of contraction, indicated that five of its 18 sectors were expanding, including some biggies.

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  55 comments for “US Manufacturing Stuck in Dour Mood, After the Boom Last Year

  1. William Smith says:

    It would be interesting to correlate all of this with actual expenditure per sector. Is the driver of this an overall downturn in “retail therapy” (because vanishing middle class), or are imports the cause. And, with new technologies, I can see why certain sectors such as printing activities and its suppliers would be hit hard. Conversely, we find electronics products expanding.

    • van_down_by_river says:

      Downturn in “retail therapy”? Haven’t you heard, the consumer is strong (whatever that means).

      CNBC reports the consumer is 70% of the economy and manufacturing isn’t important to our economy anymore. In any case, as a stock investor, none of it matters. All that matters is the market goes up when the Fed prints and right now the Fed prints bigly because someone has to pay for dear leader’s proposed Colorado border wall (not sure if that’s to keep Coloradans in or Americans out but it’s sure to cost a bunch of money.)

      The Fed will need to continue to print to fund $1.3 trillion (and growing) annual government deficits so the stock market will need to continue to rise. I may lose my job because due to shrinking manufacturing but who needs a job when you have capital gains funded by Powell.

      Wake me when the Fed stops printing money and inflating assets (in other words, don’t bother waking me).

  2. Joe says:

    Just read up on Tesla story where he has 3 car models currently being built and 6 other concept models with pre-orders for the last 2 years and not a single one built yet. From that SUV to that transport truck and others…
    Long con job?
    Certainly going to be a lot of people mad at him.

    • Lance Manly says:

      At least they are generally built in the US

      • Bobby says:

        Tesla builds cars? I thought they renamed the company to ‘Manufacturing Hell’. They mainly just issue tweets about production goals, then figure out a way to jimmy the books to make it look like they did.

      • roddy6667 says:

        They lose a lot of money on every vehicle. The company is keeping its doors open by selling bubble stock to fanboys and generous government (taxpayer) subsidies. They are not a manufacturer is the normal, business sense of the word. They are a Ponzi scheme that involves cars.

  3. njbr says:

    Apparel, Leather & Allied Products, Food, Beverage & Tobacco Products, Paper Products, Miscellaneous Manufacturing, Computer & Electronic Products.

    Consumer goods leading the charge. For how long?

    • Elongated says:

      How long can Will E. Coyote keep his legs moving after he runs off the edge of the cliff?

      • Iamafan says:

        I have very old relatives who experienced WW2. What’s happening now is still heaven, although the numbers don’t make much sense.

        • Paulo says:


          You would echo my Depression era parents. One thing that disturbs me is a lack of appreciation in today’s population that things can go to hell, and do so very quickly. I am sure my two children cannot imagine a World without employment, good wages, and opportunity. Hopefully, we have helped nurture a sense of character they can rely on if it does happen.

          My own experience from being turfed and underemployed in 1981 and for the next 4 years was, in hindsight, a good thing. I worked cashie jobs, worked away in Yukon, and did whatever to get by and keep our home. When the Great Depression hit my relatives, my grandpa had to leave his small town and work in a slaughterhouse in the Twin Cities. My dad worked there, too, right out of high school, until WW2 stared for the US and he enlisted. When I was a little kid Grandpa once told me how the pigs screamed when they were ‘stuck’ and hung up still alive, (decades before ‘Silence of the Lambs’ referenced it). My Dad talked about how ‘men’ waiting in the slaughterhouse employment room for work yelled at him when he was ushered through onto the Plant floor. “Hey kid, who the hell do you know”? Angry times.

          As to your comment, “What’s happening now is still heaven, although the numbers don’t make much sense.” Amen.

          Don’t look for intelligence and leadership these days. These goofs are winging it and running scared, imho. On Wed I am going up Island to Pt Mcneil to buy some HF radios. Coincidentally, they had a news special on the place last night. Forestry has been down and on strike for 6 months, yesterday. The economy has dropped by over 80%. Eighty percent drop in 6 months!!! A local tow truck operator was featured because he is refusing to do repos, the banks and vendors are having to bring in outside repo men. In. Six. Months.

        • Bobby 1971 says:

          Have no fear, this generation we have the plunge protection team that will save us..

  4. Brant Lee says:

    Apparel and electronics manufacturers based in the US actually making a profit? How in the heck are they making that happen?

    • Whisper says:

      Only the company HQ is in the USA.

    • MC01 says:

      Intel manufactures over 75% of their semiconductors in the US (forges in Arizona and Oregon), the rest in Israel and Ireland with only a few non-volatile memories manufactured in China.

      The US textile industry is one of the largest in the world, exporting over $30 billion worth of merchandise every year. Capital expenditures have been over $2 billion/year for the 2008-2018 decade: it’s actually cheaper to manufacture cloth and yarn in the US than China because of these investments and this led to the paradoxical situation of cotton cloth being manufactured in the US, shipped to Bangladesh to be turned into finished items of clothing, and then shipped back to the US for retail sales.
      Machines still cannot compete with human hands when it comes at stitching pockets on shirts, but they’ll soon learn (lot of money and brainpower being thrown that way by US and Japanese companies such as Softwear and Brother) and when it happens expect things to change dramatically.

      While Wall Street throws money out of the window to chase the next imaginary unicorn there are plenty of US firms that have been focusing on throwing money at actually improving what they do, be it computer processors or spun yarn. They get little of the limelight because a meal delivery outfit appeals far more to the average hipster urbanite than a textile mill but it doesn’t mean they don’t exist.

    • Gandalf says:

      The US is the world’s second largest producer of cotton, after India. But there are few jobs associated with that production. One man driving a giant harvester combine can do the work of what used to take 1500 cotton pickers.
      Much of that cotton gets exported, some 45% to China, which has now shrunk to nothing in the current trade war

  5. unit472 says:

    PMI surveys remind me of clinical trials. They are subjective and depend upon volunteers who are willing to answer questionaires.

    Clinical trials tend to attract hypochondriacs with a plethora of maladies or people willing to take an experimental drug for a small payment. Drug companies try and develop a standard that is measurable but there is nothing they can do about a trial subject who complains of side effects like nausea, insomnia or headaches.

    If your business is booming and you are busy filling customer orders are you going to take time from your day to answer a bunch of questions from a academic? OTOH if you company is doing poorly and you want to deflect blame from yourself to ‘economic conditions’ it would make sense to complete a survey since you have no real job to do.

    Yet I see PMI surveys treated as objective indices of business conditions able to sway markets yet they don’t even have a ‘clinical marker’ to measure.

    • Wolf Richter says:

      PMIs have proven to be good predictors of where months later official manufacturing data will end up. They’re a nearly real time view into manufacturing conditions.

      Almost all economic data is based on some kind of surveys.

      • Wisdom Seeker says:

        “Good predictors”… except that in this case, ISM and Markit are predicting very different paths. One will most likely prove to be wrong. The only way they can both be right is if Markit has a better lead and is already seeing a turnaround that hasn’t reached ISM yet.

        • Wolf Richter says:

          I have overlaid the two charts and they hardly ever move in the same direction in the same month. But if you apply moving averages they’re very close.

          Also, the Markit index has a neutral line that appears to be lower than the neutral line of the ISM index. This is interesting in itself. The neutral line at Markit should perhaps be in the 51-52 range, from what I see looking back at the other dips in the index and comparing them to actual manufacturing output (middle chart).

    • Prairies says:

      Not one person entering the data for this “fills orders”. This isn’t small town USA in 1919.

      The people submitting this data simply apply the numbers their spreadsheets tell them. It’s not perfect, because we don’t know how accurate data is being entered. It still keeps a finger on the pulse, without getting that finger bloody.

  6. Iamafan says:

    I think most of these horrible measures can be pushed aside if you assume we are in a currency and trade war. Kinda makes sense that national security will trump everything. I believe this is an understandable scenario.

  7. Joe says:

    Witnessed a brand new 8 year old subdivision house which was in the higher tax bracket in Canada had already sustained a great deal of rot and mold when the siding was taken off.
    The builder is a smart one and closes every 5 years to restart a new company so that he can avoid any lawsuits.

    • Elongated says:

      Yes, that’s why we should always vote to let Real Estate Developers run everything! They are so brilliant.

    • JohnK4 says:

      Joe, “the builder is a smart one and closes every 5 years…” heck, that’s too long. During the “wet condo” boom in Vancouver in the 1990s, the builders closed up shop immediately after the project was completed.

  8. gorbachev says:

    I hope the man imposes 200 maybe 300% tariffs.

    The economy will implode ,stock prices will fall ,I will

    buy and hope it is not a falling knife.However in this

    scenario the man will be gone quick and replaced by anyone

    who will repeal his nonsense and the market will fly.

    Am I dreaming.

    • OSP says:

      Lollllzz yes, you’re dreaming

    • nicko2 says:

      Trump is a paper tiger. He will cave, all he cares about is reelection… faint a hope that may be.

      • WES says:

        Nicko2:. If you only read and listen to the main stream media, yes he is surely doomed!

        Really check. Seen the size of his rallies? Can you even see Biden’s rallies?

        China wants a trade agreement but he has no intentions of even trying to reach an “unenforceable” trade agreement with China! He is just stringing them along!

        China already has a new trade deal! They are called Tariffs! And are 100% enforceable too!

        Multinationals companies heavily invested in China are very unhappy that he is forcing them to move their supply chains out of China!

        Less trade dollars are now going to China. China is buying less stuff in the EU. Now EU is hurting.

        He knows exactly what he is doing!

        He is disrupting the old existing order for a newer fairer one. Naturally everybody in the old corrupt crony order is upset! And they want you to be upset about it too!

        Main Street voters simply got fed up and set a bull in a china shop! No more Mr. Nice Guy!

        Yup! There sure is a lot of broken china on the floor! More broken china is yet to come!

        • Petunia says:

          I took my lumps last time warning them, join the club. There’s nobody on the other side who can beat him.

  9. Elongated says:

    Ah, these stuck-in-the-mud, old, manufacturing types. Always with the negative waves. Don’t they understand that everything is different this time. We’ve repealed the business cycle. Don’t they understand that focusing on profits is so last century. All they got to do is to tell the world that they are transitioning to a tech company developing new blockchain technologies. Then borrow lots and lots of money. And tweet often about how wonderful their company is. And borrow lots more money. That’s the route to success in the 21st century. This making stuff is soooooo old-fashioned.

  10. HR01 says:



    Yes, little surprise that mfg is contracting. Key question is how long services hold up in the face of the mfg slowdown.

    • MCH says:

      No kidding, I keep hearing people say that manufacturing is just 10% of the economy. Service is everything, this is what all of the economic gurus and talking heads say, manufacturing isn’t that important. Until it is.

      The impact may not be evenly felt if manufacturing goes down the toilet, but it’ll be felt at the end. Nobody actually cares about it either, all of the politicians have been bought off by Wall Street so that manufacturing is shipped overseas. By the time somebody who actually cares get in charge, manufacturing will no longer be possible here because the skilled labor would no longer exist.

      • Frederick says:

        I agree It seems to me that manufacturing is an important part of any viable economy But I’m no economist

  11. nicko2 says:

    Just got an email from our offshore bank….they’re lowering interst rates on USD savings account to basically nothing. Clear indication of impending global slowdown in 2020.

    • historicus says:

      Interest rates falling is counter productive.
      More of same, and expecting different results is the definition of what?

      • historicus says:

        Trees don’t grow to the sky….someone tell the central bankers.

        • WES says:

          Historcus:. And if the central banker’s cut CO2, then the trees won’t grow at all!

  12. David Hall says:

    Large US corporations are profitable. They did not grow profits in the most recent quarter. Companies need profit growth to raise dividends. With mfg. in a downtrend, less hope for dividend increases.

    Home prices continued to grow faster than inflation. Zoning regulations do not favor multifamily construction and affordable housing in many areas. The average size of a single family home has grown. Ownership expenses grew as people demanded bigger homes.

    • Unamused says:

      Large US corporations are profitable.

      Until they’re not. Then they go bankrupt and the chattering classes rationalise and celebrate their demise. There are many ways of making this happen.

      Companies need profit growth to raise dividends.

      No they don’t. They can just borrow the money to pay dividends. Also fat executive bonuses. That’s the important thing.

      It’s so much easier these days to simply gut a company for fun and profit than to do all that icky work of running a successful business, especially when you can pillage the pension fund and cheat your creditors. A business model for the 21st century if ever there was one.

    • Ethan in NoVA says:

      Plus speculation drives the home prices up. People overpay if they expect the asset to pay them back.

  13. Joe says:

    The mentality of the governments over the decades has really changed along with the media where only spend, spend, spend and not think of saving for any downturn.
    Anyone tries to be fiscally responsible is decimated by the media.

    • Unamused says:

      The media’s job is to reassure the peeple that they’re not getting screwed when in fact they’re getting royally screwed, and more so all the time. Naturally, anybody who figures it out is going to be slapped down, except for me because I’m out of range, and maybe Blakeslee.

      It’s all about promoting the illusion that Everything is Wonderful when it’s not. It’s about keeping the victims unable to reverse or oppose their subjugation so they can be screwed some more. Most official and media messaging has evolved to serve this purpose on just about anything that touches on personal economics and finance. Because it works.

      • RD Blakeslee says:

        Out of range, under the radar, microeconomic practices too small to bother with.

        It’s a good life.

  14. Mike says:

    Hi Wolf,
    You were mentioned as a “go-to” source in a column today on Congratulations!
    Here is the link:

  15. Iamafan says:

    It should be obvious by now. Negative rates, record debts and zombies everywhere. You’ve gotta smell the roses. Central banks will just keep on printing and buying debt until someone stops them. But there is no political will to change because socialism might be worse. You have to be in that bus that already left the station. Interest rates are so low that TINA on the dips and selling on high days will be the norm or way to live unless spending principal is your game. Not sure what else is there to do. You need to survive.

  16. Dan says:

    Markit is CEOs and ISM is Purchasing Managers. Who has more Optimism Bias? Who goes on CNBC?

    • Iamafan says:

      The former probably has a larger incentive to push the “market” narrative.
      The show must go on (regardless how insane it is).

  17. Unamused says:

    The parasite is klling the host. Naturally the parasite is concerned, but it just can’t help itself and will continue until there’s nothing left to pillage.

    Bankrupting ones customers only works in the short term. Debt peonage works better as a long-term strategy, but that too has its limitations, as the parasites are soon to discover.

    • WES says:

      Unamused:. Your first sentence perfectly describes “cancer”! It always kills it’s host!

  18. Unamused says:

    Stocks open sharply lower as Trump floats trade deal delay


    • Iamafan says:

      Does that mean “buy”?

    • Frasersgrove says:

      Makes you wonder how much shorting was done prior to this announcement by Trumps’ associates and ‘friends’…

      • Unamused says:

        Fake news. Humiliating tweets coming up. Besides, when he does it, it’s not a crime. And not taxable either. Don’t bother with subpoenae.

        Tomorrow he can announce a Most Favorable Breakthough, sending the DJIA up 500 points, and modestly congratulate himself for yet another crushing defeat dealt to America’s enemies. You didn’t really think he was going to skimp by on a lousy half billion a year, did you?

      • I hear Dalio’s fund has a 1B bear put on a 5% decline. A 5% decline is almost bullish.

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