US Manufacturing Index Hits Lowest Point in Three Years

US Manufacturing Index Hits Lowest Point in Three Years

U.S. manufacturing production in November felll to its lowest rate in more than three years, as businesses placed fewer new orders and struggled to cope with disruptions caused by Hurricane Sandy, according to the Institute for Supply Management's index. 

PMI Composite Index. Source: Institute for Supply Management

The index fell to 49.5 percent last month from 51.7 percent in October, even as the broader U.S. economy grew for the 42nd straight month in November.  A reading below 50 indicates contraction of production, and the shrinkage of manufacturing output hasn’t been so severe since July 2009, when the index registered at 49.2 percent.

The new order index fell 3.9 percentage points to 40.3 percent, the lowest point since August. The slim piece of good news is that the inventory index shrank 5 percentage points to 45 percent, suggesting shippers will have plenty of need to resupply when demand bounces back.

“The fiscal cliff is the big worry right now. We will not look toward any type of expansion until this is addressed; if the program that is put in place is more taxes and big spending cuts — which will push us toward recession — forget it,” according to an unnamed respondent in the fabricated metal products industry.