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MNI INTERVIEW: ISM Manufacturing Seen In Trough For Some Time

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The Institute for Supply Management's closely-tracked gauge of U.S. manufacturing is likely to remain in contraction for the next several months as new orders remain depressed, survey chair Timothy Fiore told MNI Friday.

"We're probably going to stay in a trough position here for quite some time. Things are moving very slowly," he said. "We're probably going to close here in December somewhere around 47 to 48. Right now, I'm thinking that we're not going to see a 50 plus PMI number until March," he said in an interview.

The ISM manufacturing index was flat in November at 46.7, one point below expectations and routing hopes for growth by the end of the year. November was the thirteenth consecutive month the ISM reading was below 50, the dividing line below which indicates contraction.

The composition of this month's report was firmer but respondents' commentary was softer in tone, and some analysts questioned whether ripple effects from the UAW strike were still depressing manufacturing activity when this survey was conducted.

Fiore said there was little to no impact from the strike. "It's not really the UAW issue. I did have 2% of comments about the strike, down from 9% in October." Instead, Fiore said weakness has been driven by computer and electronics products, machinery, and fabricated metal products, that won' improve until interest rates drop. (See: MNI INTERVIEW: Fed Cautious On Cuts Despite Disinflation-Misra)


Fiore said the PMI has come in weaker than expected a few months ago because demand has remained tepid as manufacturers work off backlog from a year ago and lead times remain higher than they should be.

"I don't see lead times getting back down to normal levels without a hard landing," he said. "One of the prices of a soft landing is that lead times haven't declined as much as we thought and with that you have pricing higher than people would prefer."

"The price of a soft landing is an uncertain future and I don't think that certainty will start to clarify until we see very true action."

The new orders gauge rebounded by about 3 points to 48.3. While still below 50, the November reading was the second best of the year. Fiore said he is expecting new order levels to remain roughly steady going forward.

The November ISM report also showed the prices subindex increased 4.8 points to 49.9, the highest reading since April, and could continue to increase.

"I think prices are going to go up again in December with the million barrels of oil coming out of the daily output," he said, also pointing to climbing steel and plastic prices.


The employment index fell by a point to 45.8, the second-lowest reading of the year. The ISM report noted that responses referencing labor force reductions were as frequent as those referencing hiring, a first since such comments have been tracked.

"That's positive because we have too many people on the payrolls for what demand currently looks like in 2024. For 2024, I expect it to not be a dramatic growth year and all the growth we're going to see will be in the second half," Fiore said. "In the first half of the year we're still looking at sleepy output numbers."

MNI Washington Bureau | +1 202-371-2121 |
MNI Washington Bureau | +1 202-371-2121 |

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