Manufacturing survey shows ‘solid’ but slower growth

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Surveys of manufacturing and services both showed slowing growth, and despite a gain in construction spending in October, it followed a revision to a decline from an initially reported rise in September.

The Institute for Supply Management’s manufacturing sector index slipped to 57.5% in November from 59.3% in October.

The new orders index fell to 65.1% from October’s 67.9%. Production declined to 60.8% from 63.0%.

The employment index dropped to 48.4% from 53.2%.

The prices index dipped to 65.4% from 65.5%, while inventories slipped to 51.2% from 51.9% and customers’ inventories fell to 36.3% from 36.7% in October. The backlog of orders index grew to 56.9% from August’s 55.7%, while the supplier deliveries index was at 61.7%, higher than the 60.5% in the prior month.

New export orders increased to 57.8% from 55.7% and imports fell to 55.1% from 58.1% a month earlier.

“The November Manufacturing PMI indicates expansion in the overall economy for the seventh month in a row after a contraction in April, which ended a period of 131 consecutive months of growth,” said Timothy R. Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The manufacturing economy continued its recovery in November.”

According to Roiana Reid, U.S. economist at Berenberg Capital Markets, the latest ISM reading shows “continued solid expansion” but slower than the month before.

“The index has been in expansion territory (above 50) for six consecutive months, due to the strong rebound in goods consumption and business equipment investment, and businesses replenishing depleted inventories,” she said. Despite numbers being “less robust” than the October report, she said, they were “still broadly positive.”

Construction spending
October construction spending gained 1.3% after a revised September 0.5% decrease, first reported as a 0.3% rise, the Commerce Department reported Tuesday.

Economists expected a 0.8% increase.

Spending year-over-year is 3.7% higher than October 2019.

Private construction rose 1.4% in the month, while public construction increased 1.0%.

“It’s encouraging to see the new construction numbers, with spending on government construction projects increasing after generally falling behind for months,” according to Murray Rowden, managing director and global head of infrastructure at Turner & Townsend. “However, the infrastructure sector still needs additional support after almost a year of revenue deterioration.”

Dallas Fed Texas service sector survey
October Texas service sector activity “remained mostly flat in November,” according to the Federal Reserve Bank of Dallas.

The current general business activity index dropped to negative 2.6 in November from positive 13.2 in October, while at the company level, the index fell to negative 0.8 from positive 7.8.

The outlook uncertainty index gained to 17.4 from 5.8 the month before.

The revenue index sunk to negative 0.7 from 7.1, the employment index climbed to 0.9 from 0.6, and the part-time employment index narrowed to negative 0.4 from negative 1.6

Hours worked fell to 2.6 from 5.5, wages and benefits increased to 11.2 from 8.6, input prices gained to 20.7 from 18.4, selling prices decreased to 3.3 from 4.1 and capital expenditures crept to 2.4 from 2.3.

Looking six months ahead, the general business activity outlook index declined 16.1 from 20.1, while the company outlook dropped to 16.2 from 17.6.

The future revenue index slipped to 34.4 from 36.3, the employment index climbed to 22.8 from 19.4, and the part-time employment index climbed to 6.8 from 5.3.

Hours worked fell to 6.9 from 9.1, wages and benefits increased to 29.7 from 28.3, input prices gained to 33.9 from 32.1, selling prices climbed to 20.4 from 19.1 and capital expenditures inched up to 14.4 from 13.3.

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