ISM: Manufacturing Drops Again in November

For the ninth consecutive month, following a two-month expansion, the manufacturing sector contracted in November, according to ISM’s report released on December 1.

The Manufacturing PM registered 48.2% in November, a 0.5-percentage point decrease compared to the reading of 48.7%in October.

The overall economy continued in expansion for the 67th month after one month of contraction in April 2020.

 “An array of challenges are keeping manufacturing in the doldrums – apart from robust factory activity tied to AI,” says Nationwide Financial Markets Economist Oren Klachkin, in a statement. “We are optimistic that the turning of the calendar will bring better fortunes for manufacturers in 2026.”

Klachkin offers the following analysis:

• The ISM Manufacturing index underwhelmed expectations for November and extended its streak of contractionary readings to nine months. An array of challenges are keeping manufacturing in the doldrums – apart from robust factory activity tied to AI.
• We are optimistic that the turning of the calendar will bring better fortunes for manufacturers in 2026. The factory sector should be on a stronger footing as domestic policy headwinds diminish and policy tailwinds strengthen while global demand picks up amid slightly lower interest rate pressures and a supportive US dollar.
• The details of the November ISM report are discouraging as new orders fell, backlogs were down, employment retrenched further, inventories declined and supplier deliveries quickened. The only bright spot was stronger production, but it continues to hover in a narrow range that took shape over the summer. Weaker new orders and backlogs in November suggest convey a thinner pipeline and that activity will lose pace in December.
• The price index edged higher but stayed elevated and flags ongoing upside risks to goods prices. We see inflation firming a little bit through early next year and losing steam after the impacts of tariffs pass through the data.
• The export index added to its October gain as it rose again in November, though it held in contraction territory. Global PMI data published overnight corroborate a firmer footing for exports, seemingly because of cooler trade tensions between China and the US. With tariff policy now likely more settled, we think trade will pose less of a headwind to economic growth in 2026.

The index readings are as follows:

Supplier Deliveries indicated faster delivery performance after three consecutive (and 14 of the previous 16) months in 'slower' territory. The reading of 49.3% is down 4.9 percentage points from the 54.2% recorded in October.

Inventories Index registered 48.9%, up 3.1 percentage points compared to October's reading of 45.8%.

New Orders Index contracted for a third straight month in November following one month of growth; the figure of 47.4% is 2 percentage points lower than the 49.4% recorded in October. 

New Export Orders Index reading of 46.2 percent is 1.7 percentage points higher than the reading of 44.5 percent registered in October.

Imports Index registered 48.9%, 3.5 percentage points higher than October's reading of 45.4%

Production Index registered 51.4%, which is 3.2 percentage points higher than October's figure of 48.2%/

Prices Index remained in expansion, registering 58.5%, up 0.5 percentage point compared to the reading of 58% reported in October.

Backlog of Orders registered 44%, down 3.9 percentage points compared to the 47.9% recorded in October.

Employment Index registered 44%, down 2 percentage points from October's figure of 46%.

What Respondents are Saying

"New order entries are within the forecast. We have increased requests from customers to get their orders sooner. Transit time on imports seems to be longer." (Machinery)

"We are starting to institute more permanent changes due to the tariff environment. This includes reduction of staff, new guidance to shareholders, and development of additional offshore manufacturing that would have otherwise been for U.S. export." (Transportation Equipment)

"Tariffs and economic uncertainty continue to weigh on demand for adhesives and sealants, which are primarily used in building construction." (Chemical Products)

"No major changes at this time, but going into 2026, we expect to see big changes with cash flow and employee headcount. The company has sold off a big part of the business that generated free cash while offering voluntary severance packages to anyone." (Petroleum & Coal Products)

"Business conditions remain soft as a result of higher costs from tariffs, the government shutdown, and increased global uncertainty." (Miscellaneous Manufacturing)

"The unstable market has made pricing fluctuate in a very volatile way; I have had to reduce suppliers for raw materials to maintain a better direct cost structure. Reducing my suppliers has reduced the availability of some items and created longer lead times." (Fabricated Metal Products)

"Business continues to be a struggle regarding long-term sourcing decisions based on tariffs and landing costs. External (or international) sourcing remains the lowest-cost solution compared to U.S. production/manufacturing. The delta is smaller now, reducing margins." (Computer & Electronic Products)

"The government shutdown has impacted our access to agricultural data, impacting agricultural markets and, as a result, decisions we make. Optimism for a tariff exemption on palm oil percolated but hasn't come to fruition at this time." (Food, Beverage & Tobacco Products)

"Trade confusion. At any given point, trade with our international partners is clouded and difficult. Suppliers are finding more and more errors when attempting to export to the U.S. — before I even have the opportunity to import. Freight organizations are also having difficulties overseas, contending with changing regulations and uncertainty. Conditions are more trying than during the coronavirus pandemic in terms of supply chain uncertainty." (Electrical Equipment, Appliances & Components)

"Domestic and export business have been lackluster. Our customers are taking prompt orders only and still don't have confidence to build inventory, much less make expansion plans. In fact, most of any kind of 'planning' has been undermined by unpredictability due to inconsistent messaging from Washington. Artificial intelligence is in its infancy stages, producing confusing and most often inaccurate information. This also causes apprehensive consumer buying patterns, contributing to the challenge of forecasting demand." (Wood Products)