November ISM PMI, Consistent with Seasonal Expectations

“Economic activity in the manufacturing sector contracted in November, and the overall economy grew for the 127th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The decrease in the ISM PMI index of 0.2 percentage point from the October reading of 48.3 percent is modest and not unexpected for this time of year- it dropped 0.5 point in 2017, and three of the last five November ISM PMI’s were negative (2017, 2015, 2014.)

Considering ongoing issues with production at Boeing (737 MAX) and residual slack as a result of the just settled UAW strike against GM, and this 0.2 percent decline is modest.

Is manufacturing in a recession? If we use the definition of “a period of temporary economic decline during which industrial activity is reduced, for two successive quarters,” the answer is not yet. four consecutive months of contraction have been logged, but following 35 straight months of growth in the manufacturing sector, we are not yet ready to throw in the towel.

What are we watching?

We are beginning to pay attention to automobile loan delinquencies which have climbed to 4.7% of the total automotive loans and leases. This is just 0.56% off from the peak of auto loan delinquencies back in 2010 (5.27%). Automotive is our industry’s single largest market served, and if automotive loans continue to go south, our shops may be in for diminished production for a longer period than anyone is expecting.

Link to  November 2019 ISM PMI Report. 

Link to Calculated Risk November 2019 ISM PMI Chart

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