Economic activity in the manufacturing sector contracted in November following two months of modest expansion, while the overall economy grew for the 42nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management^™ Manufacturing Business Survey Committee. "The PMI^™ registered 49.5 percent, a decrease of 2.2 percentage points from October's reading of 51.7 percent, indicating contraction in manufacturing for the fourth time in the last six months. This month's PMI^™ reading reflects the lowest level since July 2009 when the PMI^™ registered 49.2 percent. The New Orders Index registered 50.3 percent, a decrease of 3.9 percentage points from October, indicating growth in new orders for the third consecutive month. The Production Index registered 53.7 percent, an increase of 1.3 percentage points, indicating growth in production for the second consecutive month. The Employment Index registered 48.4 percent, a decrease of 3.7 percentage points, which is the index's lowest reading since September 2009 when the Employment Index registered 47.8 percent. The Prices Index registered 52.5 percent, reflecting a decrease of 2.5 percentage points. Comments from the panel this month generally indicate that the second half of the year continues to show a slowdown in demand; respondents also express concern over how and when the fiscal cliff issue will be resolved."

PERFORMANCE BY INDUSTRY
Of the 18 manufacturing industries, six are reporting growth in November in the following order: Petroleum & Coal Products; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The 11 industries reporting contraction in November — listed in order — are: Apparel, Leather & Allied Products; Wood Products; Primary Metals; Transportation Equipment; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing; Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; and Printing & Related Support Activities.

WHAT RESPONDENTS ARE SAYING …

• "Conditions still appear to be positive for continued growth in sales." (Machinery)
• "Business is steady, but not much more than that. We are in a lull." (Food, Beverage & Tobacco Products)
• "The principle business conditions that will affect the company over the next three or four quarters will be the U.S. federal government tax and budgetary policies; the impact of those policies is not yet clear." (Petroleum & Coal Products)
• "Differences between first half of year and remaining half are very dramatic, growing to a peak in the middle of the year with a gradual decline since." (Plastics & Rubber Products)
• "Seeing a slowdown in request for quote activity." (Computer & Electronic Products)
• "The fiscal cliff is the big worry right now. We will not look toward any type of expansion until this is addressed; if the program that is put in place is more taxes and big spending cuts — which will push us toward recession — forget it." (Fabricated Metal Products)
• "Seeing a slowdown in demand across markets." (Electrical Equipment, Appliances & Components)
• "Economy is very sluggish. Production is down and orders have slowed considerably from Q1." (Transportation Equipment)
• "East Coast storms delayed some shipments." (Primary Metals)
• "Global economic uncertainty still seems to be sticking around which is not necessarily making things worse, but it is also not making things better from a demand standpoint." (Chemical Products)

*Number of months moving in current direction

COMMODITIES REPORTED UP/DOWN IN PRICE and IN SHORT SUPPLY

Commodities Up in Price
Aluminum Products (2); Caustic Soda (4); Corrugated Boxes/Packaging (4); Polypropylene; Propylene; Steel*; and Steel – Hot Rolled.

Commodities Down in Price
Fuel; Oil; and Steel* (9).

Commodities in Short Supply
No commodities are reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.

NOVEMBER 2012 MANUFACTURING INDEX SUMMARIES

PMI^™
Manufacturing contracted in November as the PMI^™ registered 49.5 percent, a decrease of 2.2 percentage points when compared to October's reading of 51.7 percent. This is the fourth month in the last six months that the PMI^™ has contracted, and the index is at its lowest level since July 2009 when the PMI^™ registered 49.2 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI^™ in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the November PMI^™ indicates growth for the 42nd consecutive month in the overall economy, and indicates contraction in the manufacturing sector for the first month following two consecutive months of expansion. Holcomb stated, "The past relationship between the PMI^™ and the overall economy indicates that the average PMI^™ for January through November (51.8 percent) corresponds to a 3.1 percent increase in real gross domestic product (GDP). In addition, if the PMI^™ for November (49.5 percent) is annualized, it corresponds to a 2.3 percent increase in real GDP annually."

THE LAST 12 MONTHS

New Orders
ISM's New Orders Index registered 50.3 percent in November, which is a decrease of 3.9 percentage points when compared to the October reading of 54.2 percent. This represents the third consecutive month of growth in new orders following three consecutive months of contraction. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).

The seven industries reporting growth in new orders in November — listed in order — are: Petroleum & Coal Products; Paper Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Furniture & Related Products. The nine industries reporting a decrease in new orders during November — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Primary Metals; Chemical Products; Transportation Equipment; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Printing & Related Support Activities.

Production
ISM's Production Index registered 53.7 percent in November, which is an increase of 1.3 percentage points when compared to the 52.4 percent reported in October. This indicates growth in production for the second month following two consecutive months of contraction. An index above 51.2 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

The eight industries reporting growth in production during the month of November — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Paper Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Fabricated Metal Products. The seven industries reporting a decrease in production in November — listed in order — are: Primary Metals; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Chemical Products; Transportation Equipment; Machinery; and Printing & Related Support Activities.

Employment
ISM's Employment Index registered 48.4 percent in November, which is 3.7 percentage points lower than the 52.1 percent reported in October, and is the lowest reading since September 2009when the Employment Index registered 47.8 percent. This is the first month of contraction in employment following 37 consecutive months of growth in the Employment Index. An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, seven reported growth in employment in November in the following order: Textile Mills; Paper Products; Petroleum & Coal Products; Primary Metals; Furniture & Related Products; Food, Beverage & Tobacco Products; and Machinery. The 10 industries reporting a decrease in employment in November — listed in order — are: Wood Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Printing & Related Support Activities.

Supplier Deliveries
The delivery performance of suppliers to manufacturing organizations was slower in November as the Supplier Deliveries Index registered 50.3 percent, which is 0.7 percentage point higher than the 49.6 percent reported in October. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The five industries reporting slower supplier deliveries in November are: Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; Chemical Products; and Miscellaneous Manufacturing. The seven industries reporting faster supplier deliveries in November — listed in order — are: Textile Mills; Petroleum & Coal Products; Apparel, Leather & Allied Products; Machinery; Plastics & Rubber Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. Six industries reported no change in supplier deliveries in November compared to October.

Inventories*
The Inventories Index registered 45 percent in November, which is 5 percentage points lower than the 50 percent reported in October. This month's reading indicates that respondents are reporting inventories are contracting from October.  An Inventories Index greater than 42.8 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The five industries reporting higher inventories in November are: Petroleum & Coal Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Furniture & Related Products. The 10 industries reporting decreases in inventories in November — listed in order — are: Wood Products; Miscellaneous Manufacturing; Primary Metals; Apparel, Leather & Allied Products; Transportation Equipment; Paper Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Chemical Products; and Machinery.

Customers' Inventories*
The ISM Customers' Inventories Index registered 42.5 percent in November, which is 6.5 percentage points lower than in October when the index registered 49 percent. This month's reading reflects the lowest level since December 2011 when customers' inventories also registered 42.5 percent. Customers' inventories have registered at or below 50 percent for 44 consecutive months. A reading below 50 percent indicates customers' inventories are considered too low.

The only manufacturing industry reporting customers' inventories as being too high during the month of November is Petroleum & Coal Products. The 11 industries reporting customers' inventories as too low during November — listed in order — are: Plastics & Rubber Products; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; and Apparel, Leather & Allied Products. Six industries reported no change in customers' inventories in November compared to October.

Prices*
The ISM Prices Index registered 52.5 percent in November, which is a decrease of 2.5 percentage points compared to the October reading of 55 percent. In November, 18 percent of respondents reported paying higher prices, 13 percent reported paying lower prices, and 69 percent of supply executives reported paying the same prices as in October. A Prices Index above 49.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

Of the 18 manufacturing industries, seven reported paying increased prices during the month of November in the following order: Primary Metals; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Machinery; Fabricated Metal Products; and Furniture & Related Products. The five industries reporting paying lower prices during November are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Computer & Electronic Products; and Paper Products. Six industries reported no change in prices paid for the month of November when compared to October.

Backlog of Orders*
ISM's Backlog of Orders Index registered 41 percent in November, which is 0.5 percentage point lower than the 41.5 percent reported in October. This is the eighth consecutive month of contraction in order backlogs. Of the 86 percent of respondents who reported their backlog of orders, 14 percent reported greater backlogs, 32 percent reported smaller backlogs, and 54 percent reported no change from October.

The three industries reporting increased order backlogs in November are: Electrical Equipment, Appliances & Components; Machinery; and Paper Products. The 11 industries reporting decreases in order backlogs during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Wood Products; Miscellaneous Manufacturing; Chemical Products; Transportation Equipment; Fabricated Metal Products; Plastics & Rubber Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

New Export Orders*
ISM's New Export Orders Index registered 47 percent in November, which is 1 percentage point lower than the 48 percent reported in October. This month's reading represents the sixth month of contraction in the index since June 2009, when the index registered 49.5 percent. Prior to this current six-month period of contraction, the New Export Orders Index had registered 50 percent or above for the previous 35 consecutive months.

The five industries reporting growth in new export orders in November are: Petroleum & Coal Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Paper Products; and Miscellaneous Manufacturing. The six industries reporting a decrease in new export orders during November — listed in order — are: Primary Metals; Transportation Equipment; Computer & Electronic Products; Machinery; Chemical Products; and Apparel, Leather & Allied Products. Seven industries reported no change in new export orders for the month of November when compared to October.

Imports*
ISM's Imports Index registered 48 percent in November, which is 0.5 percentage point higher than the 47.5 percent reported in October. This month's reading reflects the fourth consecutive month of contraction in imports since November 2011, when the Imports Index registered 49 percent.

The six industries reporting growth in imports during the month of November — listed in order — are: Textile Mills; Plastics & Rubber Products; Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components. The eight industries reporting a decrease in imports during November — listed in order — are: Paper Products; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; Chemical Products; Machinery; Fabricated Metal Products; and Apparel, Leather & Allied Products.

* The Inventories, Customers' Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Buying Policy
Average commitment lead time for Capital Expenditures decreased 5 days to 117 days. Average lead time for Production Materials decreased 1 day to 55 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased 2 days to 25 days.