Factory activity in the United States has contracted for the fourth consecutive month as new orders for November slipped to their lowest level since 2012. Coupled with a slump in construction spending last month, economic optimism is tempering off a recent run of positive reports.
That data for this week resulted in the Federal Reserve Bank (of Atlanta) slashing its estimate for the gross domestic product during the fourth quarter. It was only last Wednesday when the Atlanta Fed boosted its growth estimate by as much as 1.3 percent thanks to the encouraging update, which included a significant drop in October’s goods trade deficit. Also, a strong rebound in the realm of business spending (on equipment) also helped; at least, at the time.
According to the Institute for Supply Management, its index of national factory activity fell 0.2 percent to 48.1 last month. Any reading below 50 signals contraction within the manufacturing sector; and the manufacturing sector accounts for 11 percent of the total US economy. Some economists had originally forecast the ISM index would rise from 48.3 in October to 49.2 in November.
That said, the ISM index is still above the 42.9 level that is most often associated with a recession across the broader economy as a whole. The ISM also has a new orders sub-index that tends to help adjust for future growth but even that has tumbled almost 2 percent, falling to 47.2 last month. This matches the reading from July, which was the lowest reading since June of 2012. Exports do not appear to be doing much better, either, with a reading of 47.9 points.
According to the survey, employment index fell 1.1 points, to 46.6 last month. This decline increases the risk that factory payrolls will remain down from November through the rest of the year. This has also been impacted by the worker strike at General Motors (which started in October).