After 41 months of growth, manufacturing stalls out
December 5, 2006,
Tempe, Ariz. -- Pointing to slowing growth ahead, manufacturing activity subsided—failing to grow at all, for the first time in more than three years, the nation's purchasing managers reported.
In its monthly update on the manufacturing sector, the ISM said its Purchasing Managers' Index fell 1.7 percentage points to a reading of 49.5%, as overall activity in the sector turned down. A reading of 50.0 or more indicates an expansion in the sector, while anything less than that points to a contraction in this key driver of the American economy.
"In November, manufacturing activity declined to its lowest level in 42 months as the PMI fell to 49.5%," said Norbert Ore, chairman of the ISM's Manufacturing Business Survey Committee. "The last time the Purchasing Managers' Index registered below 50 was April 2003," when it fell to a level of 46.5%, he added.
Scoping out specific index components, "New orders and production both ended growth cycles at 42 months during November," said Ore. New orders fell by 3.4% to a level of 48.7, while production fell 3.4% to a reading of 48.5. Employment dropped off by 1.6% to 49.2. In more vexing news for manufacturers, the price they pay for raw materials and supplies jumped by 6.5% in November to a level of 53.5 after subsiding and providing some relief in October.
Manufacturers' inventories grew by 0.3% to a level of 49.7, while their customers' inventories fell by 1.5% to a reading of 50.5%, suggesting a need for them to reorder. In some good news, order backlogs, while still in contraction, grew by 2.0% to a level of 46.5%.