ISM Manufacturing Index Rebounds In November: 5 Picks

The latest survey numbers from the Institute for Supply Management (ISM) are in and they indicate that this is a great time for U.S. manufacturing. After two months of weakness, the ISM manufacturing index rebounded last month. The survey reveals that manufacturers clearly think business conditions have improved toward the end of the year.

And this improvement has come despite the burden of tariffs and a paucity of skilled manpower. Meanwhile, a temporary ceasefire was concluded between the United States and China over the weekend. This will act as a major headwind for manufacturers in the near term. Investing in stocks from the sector looks prudent.

November Rebound Defies Tariffs, Labor Shortages

The ISM manufacturing index came in at 59.3% in November, 1.6% higher than the level of 57.7% registered in October, the lowest recorded in 18 months. November’s reading also came in above the consensus estimate of 57.7%. The pace of manufacturing activity had declined in the two prior months.

The rebound was largely powered by a spurt in new orders, the index for which increased 4.7% to 62.1%. The Production Index advanced 0.7% to 60.6%. As a result, the manufacturing sector stepped up hiring or encouraged existing workers to put in additional hours overtime. Consequently, the Employment Index increased 1.6% to 58.4%.

On the flip side, the prices index declined 10.9% to 60.7%. This was a sign that raw material prices continue to be a worry for the 33rd straight month. However, the ISM survey committee’s chairman Timothy R. Fiore claimed: “Prices pressure continues, but at notably lower levels than in prior periods”.

U.S.-China Trade Truce Sign of Better Times

Overall, the report signals that American manufacturing continues to grow despite tariff pressures and labor shortages. This is in keeping with the broader economy, which grew at a 3.5% pace in the third quarter, per the latest estimate. Per the ISM, 13 of 18 manufacturing industries experienced growth last month.

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