Overview of November manufacturing performance

The Institute for Supply Management (ISM) released its Manufacturing Report on Business today showing that U.S. manufacturing continued to shrink in November, marking the ninth consecutive month of contraction. The report’s headline index, the Purchasing Managers' Index (PMI), stood at 48.2, below the 50 threshold that separates growth from contraction.

PMI movement and broader economic context

The PMI reading of 48.2 was down 0.5 percentage points from October and came in 0.8% below the 12-month average of 48.2. Despite the manufacturing downturn, the ISM noted that the overall U.S. economy has been expanding, but at a slower pace for the 67th consecutive month.

Monthly highs and lows within the year

Across the past 12 months, the PMI reached a high of 50.9 in January and a low of 48.0 in July. November’s reading signals a renewed weakening in manufacturing activity after intermittent increases earlier in the year.

Sectors showing expansion and contraction

The ISM report identified four manufacturing sectors that expanded in November and a larger group that contracted.

• Growing sectors: Computer & Electronic Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery
• Contracting sectors: Apparel, Leather & Allied Products; Wood Products; Paper Products; Textile Mills; Fabricated Metal Products; Petroleum & Coal Products; Chemical Products; Nonmetallic Mineral Products; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products

Panelist feedback and recurring themes

ISM said tariffs and the overall economic picture were the dominant themes in comments from panel members. An Electrical Equipment, Appliances & Components respondent described trade as clouded and difficult, noting rising export errors and overseas freight organizations grappling with shifting rules and uncertainty that, in their view, make current supply-chain conditions more challenging than during the coronavirus pandemic.

A panelist in the Computer & Electronic Products sector reported that long-term sourcing decisions remain difficult because of tariffs and landing costs. They added that international sourcing still tends to be the lowest-cost option versus domestic manufacturing, though the cost gap has narrowed and is squeezing margins.

Committee chair analysis on supply-chain waves

Susan Spence, chair of the ISM Manufacturing Business Survey Committee, told LM that the November data add to a pattern she describes as one-time bubbles moving through the supply chain. She said November’s faster contraction reflected pullbacks in supplier deliveries, new orders and employment.

Spence outlined a sequence observed over recent months: a surge in new orders first showed up, then moved into production, later into backlog, and has now translated into a production decline as other indices that had surged began to weaken. She likened the pattern to a wave passing through different measures of activity.

Signals from new orders and supplier deliveries

ISM’s readings of lower new orders alongside quicker supplier deliveries suggest manufacturers’ order pipelines are not full, erasing the earlier production uptick that Spence characterized as likely being a temporary bubble. That combination points to diminished near-term demand for many producers.

Uncertainty over tariffs and sourcing decisions

Spence warned that ongoing uncertainty about trade policy—including questions about IEEPA-related tariffs and potential Supreme Court rulings—is prompting buyers to delay decisions and search for alternative suppliers outside the U.S. She said the lack of policy clarity is discouraging business and could cause long-term shifts in where companies source goods.

She argued that without a clear catalyst to restore buyer confidence in U.S. suppliers, more firms will move purchasing elsewhere. Recalling an industry adage that "money goes where it is treated well," Spence said repeated supplier price hikes in her aerospace experience pushed companies to invest in alternative sourcing when volatility and surprises became unsustainable.

Outlook for the remainder of 2025 and into 2026

With 2025 winding down, Spence said it is reasonable to expect current manufacturing conditions to persist and likely carry into 2026 unless a sustained growth catalyst appears to restore ordering confidence. The longer clarity and stability are delayed, the more time international buyers have to find other suppliers.

Longer-term risks for domestic suppliers

Spence cautioned that at some point companies will inform boards or senior management that they cannot absorb ongoing whiplash and chaotic policy shifts indefinitely. She warned that many firms will respond by minimizing orders from existing suppliers while they secure new partners, a change that could further weaken U.S. manufacturing demand.