What even are these manufacturing PMIs?
By Wolf Richter for WOLF STREET.
Manufacturing in the US as seen by the two big US manufacturing PMIs:
The ISM Manufacturing PMI report this morning said: “Economic activity in the manufacturing sector contracted in November for the ninth consecutive month, following a two-month expansion preceded by 26 straight months of contraction.” The reading for November came in at 48.2%. Below 50% means decline.
Manufacturing activity has been declining for the past 37 months, with the exception of (barely) January and February, according to ISM.
But ISM’s measure would have to drop to 42.3% to ring the recession alarm bell, as a value above 42.3% “generally” indicates the economy is expanding overall. So ISM said today: “The overall economy continued in expansion for the 67th month after one month of contraction in April 2020.”
Four manufacturing industries reported growth in November, according to ISM: Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing (medical equipment and supplies, jewelry, sporting goods, toys, and office supplies); and Machinery.
The S&P US Manufacturing PMI, also released this morning, told a different story, once again: “Operating conditions in the US manufacturing sector improved for a fourth successive month in November. A solid rise in production and a further increase in employment was reported as confidence in the outlook strengthened.”
According to S&P, manufacturing has been in growth mode all year, except for a small decline in July.
The S&P US Manufacturing PMI for November came in at 52.2 (above 50 = growth), “consistent with another solid, albeit slower, improvement in operating conditions.” In October, the reading had been 52.5. A key driver of the growth was “strong rise in factory production.” And it said, “further increase in employment was reported as confidence in the outlook strengthened.”
What even are these PMIs? Purchasing Managers Indices are diffusion indices based on surveys of a panel of executives of companies of all sizes spread across the major manufacturing industries. The surveys don’t ask for figures.
PMIs ask a series of questions, with three possible answers – increased, no change, decreased – in the current month versus the prior month.
For each respondent, increased gets a value of +1; no change gets a value of 0; decreased gets a value of -1. Then it’s averaged out.
In these PMIs here, the no-change line = 50, meaning the same number of respondents said “increased” as said “decreased.” A value over 50 means that more respondents said increased than said decreased. A value below 50 means that more respondents said decreased than said increased.
Actual figures are not given, neither in dollars nor in units. It’s just increased, no change, decreased; and always current month compared to prior month.
The S&P US Manufacturing PMI for November had some quibbles amid its growth reading (52.2). Rising costs due to inflationary pressures and tariffs were difficult to pass on due to competition, leaving “selling price inflation amongst the lowest of the year so far amid intense competition and weak demand.” And so, profit margins were “under pressure.”
More respondents said that sales in November decreased from October, than said sales increased. And more said that inventories increased from the prior month than said inventories decreased.
Again: based on three possible answers – increased, no change, decreased – not actual figures.
And it concluded: “Encouragingly, manufacturers have grown more optimistic about the year ahead, with the ending of the government shutdown helping lift confidence from the sharp drop suffered in October. Optimism is being fueled by hopes of improved policy support, including lower interest rates, as well as greater political stability, though it is clear that uncertainty remains elevated and a drag on business growth in many firms, holding confidence well below levels seen at the start of the year.”
The ISM Manufacturing PMI for November had lots of quibbles. But “production jumped into expansion” (51.4%) and prices rose (58.5%).
All other categories were below 50%, and therefore declining from the prior month:
- New orders (47.4%)
- Employment (44.0%)
- Supplier deliveries (48.9%, faster deliveries than in the prior month)
- Customer inventories (44.7% = “too low” which “is usually considered positive for future production)
- Backlog of orders (44.0%)
- Export orders (46.2%)
- Imports (48.9%)
Again, all based on increased, no change, or decreased – with no actual figures.
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I-N-F-L-A-T-I-O-N. The monster in the room.
ISM is closer to reality right now.
We’re running at 2009 levels of demand and output – off 50-60% from normal. Several suppliers have confirmed similar conditions with their other customers in unrelated industries. Our primary steel supplier recently said, “everything except metal going into data centers and grain storage is exceptionally slow”.
I heard through the grape vine that one of the largest names in our industry booked their worst month of sales on record in September 2025. In September, we logged our third-worst month on record. October and November were better, but not by much.
IMO This doesn’t mean the whole economy is weak… but I would argue that the “wealth-generating” segments of it are quite weak. The news is slowly picking up on this reality.
Generally, never extrapolate from one company to US manufacturing overall. It will just mislead you. It’s easy to do, and so it’s appealing, but company-specific stuff doesn’t apply to overall manufacturing. That’s precisely why we try to use data.
Companies go bankrupt all the time even in booming economies.