US Factory Activity Hits 6-Year Low

According to ISM, of the 18 manufacturing industries, Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment all reported growth in November, while Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; and Chemical Products contracted.

A reading above 50 indicates the sector is generally expanding, while a reading below that level indicates contraction.

The Institute for Supply Management (ISM) said its index of national factory activity fell to 48.6, the first time the index has been below 50 since November 2012, after reading 50.1 in October.

The Tempe, Ariz.-based ISM said the report showed factories believed their customers continued to have too many goods on hand, indicating it will take time for orders and production to stabilize.

“Manufacturing has an inventory problem”, Meckstroth said. I do not think it is enough on its own to derail a hike, but it certainly does not help.

“It’s the flawless storm for manufacturing”, said Brett Ryan, a US economist at Deutsche Bank Securities Inc.in NY, whose forecast was among the closest in the Bloomberg survey.

Friday’s jobs report will provide another look at how industry employment fared in the month of November. Still, the report showed a rebound in hiring as its employment measure improved to 51.3 from 47.6 a month earlier. The index has fallen for the past five months, but was as high as 53.5 in June.

“The good news is that the much more important services sector continues to do very well, benefiting from solid domestic demand”. But the index remained below the 50 mark that signals growth.

Exports shrank for the sixth straight month, which Mr. Holcomb attributed to the strong dollar and weak demand from China.

The manufacturing numbers spurred investors to buy USA government debt, as the 10-year Treasury yield fell to a one-month low of 2.14%. China has been stuck in a slowdown, as has Brazil. Since March 2010 through October of this year, the economy has added 864,000 manufacturing jobs, or an average of 13,000 per month. The November PMI indicates growth for the 78th consecutive month in the overall economy. The November ISM services report will be released Thursday.

Only five of the 18 manufacturing sectors in the US actually grew.