U.S. Manufacturing Decreases

3 Dec

imagesAmerican manufacturing contracted in November for the first time in three months as factories throttled back hiring and investment amid uncertainty about the U.S. economy and budget policies.In the U.S., the Institute for Supply Management’s index of manufacturing activity fell to 49.5, the lowest level in more than three years. Readings under 50 indicate activity is shrinking instead of growing.

Employment in the manufacturing sector contracted for the first time in three years, while a measure of inventories—a gauge of future demand—dropped sharply to 45 from 50, suggesting firms are delaying hiring and keeping stockpiles low. Production surged, but order backlogs fell, a sign that businesses are exhausting old orders rather than receiving new ones. New orders and exports also dropped.

 

 

The latest pullback by factories could prove temporary. The ISM’s manufacturing index has averaged 50.4 over the past five months, below its 53 average in the first half of the year, yet still suggesting manufacturing growth. “A favorable resolution [to the fiscal cliff] could get us back on track,” Mr. Holcomb said.

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