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The nation’s leading production index, the Institute for Supply Management’s PMI, increased 1.6 percentage points to 59.3 percent in November. “I’d say we are continuing to bounce along at the top [of expansion] but I’ll take 59 any day,” said Tim Fiore, chair of the ISM’s manufacturing business survey committee. Any number above 50 indicates growth.
Despite continued shortages in electronic components, computers and electronic products led manufacturing growth in November. Electronics are one of the “Big 6” contributors to U.S. production, which also includes oil and petroleum products and fabricated metals. Electronics OEMs have been able to meet end customers’ demand even with supply constraints.
Still, one executive commented: “Shortages, longer lead times and capacity constraints [particularly in the electronic components marketplace] and tariffs continue to strain the supply chain and disrupt normal business practices and activities.”

Photo: Intel Corp.
But demand remains strong, said Fiore. “The new orders index rebounded to above 60 percent; customers’ inventories declined; and backlogged orders remained stable. Consumption strengthened, with production and employment continuing to expand, both at higher levels compared to October.”
The new orders index registered 62.1 percent in November, an increase of 4.7 percentage points. The production index increased by 0.7 percent to hit 60.6. “Customer demand expansion reversed two consecutive months of softening, with the index returning above 60 percent and recording its highest value since August 2018, when it registered 65.1 percent,” Fiore added. Employment reached 58.4 percent, up 1.6 percentage points from the October
A number of industry sectors reported they have pulled in raw materials orders (measured as imports) to secure 2018 pricing. The 90-day “crease fire” on tariffs, announced over the weekend by the U.S. and China, isn’t likely to have a dramatic impact early in 2019. Nevertheless, U.S. manufacturers aren’t risking higher prices. The U.S. and China agreed to continue negotiations for 90 days, so the next move on tariffs is likely to be in April, Fiore said.
Manufacturers’ tariff-related comments to the ISM declined in November, he added. Several industry executives reported their supply chains have adjusted to the “new normal.”
“Business remains strong,” said one manufacturer. “The tariffs impact is fully reflected in Q3 results, and initiatives are underway to move work out of China into other low-cost countries.”
Lead times, however, remain a concern, said Fiore. “Lead times continue to expand, which is a different thing than shortages which are tied to supplier deliveries. Suppliers are continuing to push out lead times and buyers have no choice but to comply. But when you keep piling on to lead times you generate risk. Customers are ordering way in advance, and suppliers may need to add employees or capacity. So general lead-time expansion is bad, especially if things slow.”
Inputs — expressed as supplier deliveries, inventories and imports — gained in November as a result of inventory growth, according to the ISM. Supplier deliveries increased 1.3 percent to reach 62.5. “[Easing supplier deliveries] improved factory consumption as well as inventory growth, and import expansion was relatively stable,” Fiore said.
The ISM’s inventories index registered 52.9 percent, an increase of 2.2 percentage points from the October reading of 50.7 percent. The prices index registered 60.7 percent, a 10.9-percentage point decrease from the October reading of 71.6 percent, indicating higher raw materials prices for the 33rd consecutive month. “Supplier labor issues and transportation difficulties are at more manageable levels, but they continue to limit production potential,” Fiore concluded.
The ISM also measured the sentiment of U.S. manufacturers, and the majority of companies have a positive outlook for Q4 2018 and Q1 2019. The ISM’s mid-year economic survey is set to be released on December 10.