US: ISM Manufacturing index slowdowns, but still solid – Wells Fargo

The ISM index dropped 1.8 points in November, at 57.5. Still, activity in the industry continues to improve at a heady pace as the goods side of the economy has been less affected by the pandemic, explains analyst at Wells Fargo. 

Key Quotes: 

“Strength in goods spending has kept manufacturing activity rising at a solid rate, with the ISM index coming in at 57.5. Low customer inventories provide further runway for production, but supply chain issues continue.”

“The drop in the headline reflected fairly broad slippage among most components. The pace of current production eased up, as did new orders. Both remain solid, however, and came in above 60. And while the index for all new orders slipped, export orders, which are not included in the composite index, improved to a two-and-a-half-year high.”

“Despite solid orders and low inventories, the employment index tumbled back into contraction territory last month, falling nearly five points to land at 48.4. That may be a sign that manufacturers are guarded when it comes to the durability of the industry’s rebound.”

“We expect manufacturing activity to remain strong in the coming months. Output, as measured by the Fed’s industrial production report, remains 4.6% below its February level despite consumer spending on goods up 7.8% and capital goods shipments rising 1.3% since then.”