In November, the manufacturing sector in the United States remained weak, with factory employment falling even more as hiring slowed and layoffs surged. This was another indication that the economy was losing pace after seeing substantial growth in the previous quarter.

Following the release of data on Thursday that showed a slight increase in consumer spending in October, the Institute for Supply Management (ISM) conducted this poll on Friday. Increases in interest rates are reducing demand, causing economic activity to decrease. However, most experts do not anticipate a recession in the coming year.

“It reinforces anecdotal evidence and other surveys suggesting a slowing economy so far in the fourth quarter,” said Will Compernolle, a macro strategist at FHN Capital in New York. “It is so far in the fourth quarter.”

During the previous month, the ISM reported that its manufacturing PMI remained at 46.7. The Purchasing Managers’ Index (PMI) remained below 50 for the thirteenth month, indicating a drop in manufacturing activity. Since the period from August 2000 to January 2002, this is the most extended period that has occurred recently.

As a result of most manufacturers in the ISM survey describing customer inventories as being bloated, a comeback shortly is highly improbable.

In a survey conducted by Reuters, economists predicted that the index would gradually increase to 47.6. According to the Institute of Supply Management (ISM), a PMI value below 48.7 over time typically indicates a contraction of the entire economy. However, the fact that the economy grew at an annualized pace of 5.2% during the third quarter shows that it is still growing.

Several economists thought that the strike by the United Auto Workers, which ended in late October, continued to affect the PMI. Manufacturers of fabricated metal goods have asserted that the UAW strike still impacts automotive sales and that they are “still waiting for orders to come in.”

During the previous month, an increase was recorded in three different industries: the food, beverage, and tobacco industries, as well as the transportation equipment and nonmetallic mineral products industries. Paper goods, electrical equipment, appliances and components, computer and electronic items, machinery, and other types of manufacturing were among the twenty-four industries that reported a decline.

Most of the comments made by manufacturers were pessimistic, and they emphasized the importance of lowering inventory levels. Manufacturing companies that produce computer and electronic goods have stated that the “economy appears to be slowing dramatically.” They have also mentioned that “customer orders are pushing out.” Several manufacturing companies say, “Customer orders have pushed into the first quarter of 2024, resulting in inflated end-of-year inventory.”

According to reports from food, beverage, and tobacco product manufacturers, “our executives have requested that we bring down inventory levels considerably, and it has started causing customer shortages.”

According to the so-called complex data, the industrial sector, which accounts for 11.1% of the GDP, has presented a contradictory image. Even though factory production is decreasing, there has been a significant increase in the number of orders placed for long-lasting products.

The stock market in the United States was up. When compared to a basket of currencies, the dollar decreased somewhat. The price of U.S. Treasury bonds went up.

THE GLUT OF CUSTOMER INVENTORY

After reaching a low of 45.5 in October, the forward-looking new orders sub-index of the ISM survey increased to a still-weak 48.3 in the most recent month. There was a decrease in production at factories. Orders sitting in the backlog continued to decrease.

For the last month, a measure of manufacturing inventories stayed low. At the same time, the gauge of stockpiles at customers climbed to a level that the Institute of Supply Management (ISM) classified as being on the upper end of the “just right” range.

“Leading indicators in the report, particularly new orders and customer inventory levels, do not point to an upturn in activity in the immediate future,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. Other leading indicators include new orders and customer inventory levels. “However, neither does the report point to the pervasive weakness in manufacturing that is typically associated with recession.”

Although prices for manufacturing inputs were not declining at the same rate as in previous months, they were still relatively low. Compared to the figure of 45.1 in October, the survey’s measure of prices paid by manufacturers jumped to 49.9, which is the highest level in seven months.

Although this is the case, pricing pressures in the economy are beginning to ease. According to a study the government released on Thursday, the yearly increases in inflation were the lowest in more than two and a half years.

A decrease in inflation is stoking the fires of anticipation that the Federal Reserve will likely finish raising interest rates for this cycle. Financial markets are even preparing for a rate drop in the middle of 2024.

Compared to the previous month’s measurement of 47.7, the ISM survey’s measure of supplier deliveries dropped to 46.2. An indicator of speedier delivery is a value that is lower than 50.

For the second consecutive month, factory employment has decreased, which may be attributed to a decrease in hiring and an increase in layoffs.

“Attrition, freezes, and layoffs to reduce head counts increased during the period,” wrote Timothy Fiore, the ISM Manufacturing Business Survey Committee chair. “This was done in an effort to reduce head counts.”

There was a decrease in the gauge of industrial employment from 46.8 in October to 45.8 in the most recent month of the survey. This indicator is not a reliable predictor of manufacturing payrolls in the government’s jobs report, which the federal government constantly monitors.

As a result of around 33,000 striking United Auto Workers members returning to work in November, manufacturing payrolls are anticipated to have recovered. Thirty-five thousand fewer positions were added to factory payrolls in October.

Following the growth of 150,000 jobs in October, it is anticipated that the total number of nonfarm payrolls will climb by 170,000, according to a preliminary survey of economists conducted by Reuters. The following Friday, the government will release the employment data for November.