ISM Manufacturing Index Hits 2-1/2 Year High at 57.3 in November

Andrew Klips |

According to the Institute for Supply Management, manufacturing activity in the United States expanded for the sixth straight month in November, growing at its fastest pace since April 2011.

ISM Manufacturing Index Beats Estimates for November

The ISM Manufacturing Index climbed to 57.3 last month from 56.4 in October.  Economists were expecting the index to fall to 55.  Readings above 50 indicate expansion in activity at factories, while readings below 50 signify contraction.  May was the last time the index was below 50.  The index has risen progressively in every month since June, even shirking-off the 16-day partial government shutdown early in October.

The forward-looking New Orders Index improved by 3 percentage points to 63.6 in November, while the Production Index climbed from 60.8 in October to 62.8.  The Employment Index hit its highest level since April 2012 (when it was 56.8) with an increase of 3.3 percentage points to 56.5.  7 of the 11 subindexes recorded gains for November as compared to October.  The Prices Index dropped from 55.5 to 52.5, still showing expansion, just at a slower pace.  Customers Inventories Index was the only one under 50, fading from 47 in October to 45 in November.

“With 15 of 18 manufacturing industries reporting growth in November relative to October, the positive growth trend characterizing the second half of 2013 is continuing," said Bradley J. Holcomb, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee.

Manufacturing Also on the Rise in Euro Zone, China

The overall upbeat report on manufacturing fell in line with other reports on the health of factories both domestic and international.  Financial data firm Markit hit the markets with a litany of reports on manufacturing across the globe on Monday.  Markit’s PMI for the U.S. rose to 54.7 in November from 51.8 in October.  The consensus estimate was for an increase to 54.3.

Overseas, manufacturing in Euro Zone picked-up more than expected, edging up to 51.6 in November from 51.3 in October and marking a more than two-year high.  Germany’s PMI beat expectations with a 1-point climb to 52.7.  With the exception of contraction in France (48.4) and Spain (48.6), the Markit report painted a fairly rosy picture for manufacturing in Europe.

China’s National Bureau of Statistics reported over the weekend that its Purchasing Managers’ Index held at an 18-month high in November, registering a 51.4 for the month and topping economist predictions of a decline to 51.1.  HSBC’s China Manufacturing PMI showed marginal expansion at factories in the world’s second biggest economy.  Seasonally adjusted, the PMI was 50.8 in November, up from the original “flash” estimate, and nearly flat with the 50.9 reading in October.

If the markets were surging ahead in Monday trading, the media would be saying that it’s a result of the positive reports on manufacturing.  However, the markets are flat in early trading, following the trend of a late-day sell-off in a shortened session on Friday, with the media citing the reports as increasing the likelihood that the U.S. Federal Reserve will begin tapering its massive economic stimulus package sooner, rather than later.  The Dow Jones Industrial Average is down 25 points, while the S&P 500 and Nasdaq have eked up less than 1 point.

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