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Manufacturing in U.S. contracts for first time since May 2020

Dec. 1, 2022 Updated Thu., Dec. 1, 2022 at 8:24 a.m.

By Jordan Yadoo Bloomberg

U.S. manufacturing contracted in November for the first time since May 2020 as output weakened in the face of a third-straight month of shrinking orders.

The Institute for Supply Management’s gauge of factory activity slid to 49 from 50.2 in the prior month, according to data released Thursday. The measure has fallen in five of the last six months and stands below 50, the threshold separating expansion and contraction, for the first time since the pandemic lockdowns.

“The November composite index reading reflects companies’ preparing for future lower output,” Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, said in a statement.

The median projection in a Bloomberg survey of economists called for a reading of 49.7. Just six manufacturing industries reported growth in November.

A measure of prices paid for materials used in the production process fell for an eighth straight month, the ISM report showed. Input prices shrank at the fastest pace since May 2020 in a welcome sign goods inflation is easing amid less stress on supply chains.

The group’s measure of new orders has contracted for the fifth time in six months, while the production gauge retreated to 51.5 in November. The weakest readings for both order backlogs and imports in more than two years also indicated softer demand.

A measure of customer inventories showed stocks shrank at the slowest rate since April 2020. That may help explain the falloff in new orders to manufacturers and fuel concerns about the inventory glut seen at some retailers.

The overall gauge was further weighed down by shrinking payrolls in the sector, as manufacturers cope with both labor shortages and a moderation in demand.

A separate manufacturing survey from S&P Global showed similar results. The group’s final November purchasing managers index fell from a month earlier to 47.7, the first contraction since mid-2020.

The U.S. figures are consistent with a broader slowdown in manufacturing around the world. The S&P Global measure of factory activity in the euro area pointed to contraction, while in Japan, the gauge dropped below 50 for the first time in almost two years. Electronic hubs Taiwan and South Korea were also sluggish.

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