Manufacturing expansion strengthened in November on a strong gain in new orders, the Institute for Supply Management (ISM; Tempe, AZ) said in a monthly report.
The group’s manufacturing index, known as the PMI, advanced to 59.3% last month, up from 57.7% in October. The uptick snapped a two-month streak of slipping PMI numbers.
Increased new orders recorded now will help boost production in the first quarter of 2019, Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.
“I think it bodes really well for Q1 of 2019.” he said. “We’re in a pretty good position.”
The PMI is considered a leading economic indicator, meaning it provides an early sign of what’s to come. The October PMI had been the lowest level in six months. The question was whether October was the start of a cool down. For now, that concern has faded.
“We’re bouncing across the top,” Fiore said of the PMI.
The ISM report is based on a survey of 350 purchasing and supply executives. A reading above 50% indicates a growing manufacturing economy. Below 50% indicates economic contraction. November was the 27th straight month with a PMI reading over 50%.
The PMI has averaged 59.2% the past 12 months. The highest level during that period was 61.3% in August. The lowest was 57.3% in April.
Thirteen of 18 industries reported economic expansion last month. They included textiles, miscellaneous manufacturing, machinery, transportation equipment and petroleum and coal products. Three industries reported contraction, including primary metals.
One continuing concern among respondents is tariffs implemented amid continuing trade tensions. The November survey was completed before a truce in the trade war between the United States and China took place over the weekend. The U.S. said it would postpone a threat to boost tariffs on $200 billion of imported Chinese products to 25% from 10%. The delay is to last three months.
In November, the number of comments from respondents in the ISM survey about tariffs declined from previous months, Fiore said.
“It’s a cease fire…not really a relaxation” of tariffs, he said. “At least it’s not an expansion. I definitely see that as a positive move.” Fiore added he expected the U.S.-China trade cease fire to affect the December PMI.
The group’s New Orders Index surged to 62.1% last month, up from 57.4% in October. Eleven of 18 industries reported gains in new orders. Four industries reported declines in orders, including fabricated metal products.
ISM’s Production Index registered 60.6%, up from 59.9% in October. Eleven industries said output rose while three, including fabricated metal products, reported declines.
The group’s Employment Index also advanced, reaching 58.4% last month from Octobers’ 56.8%. Ten industries reported adding jobs. Four reported job cuts, including primary metals and fabricated metal products.