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US manufacturing sector slows in November
[WASHINGTON] US manufacturing activity slowed in November, with new orders retreating from their highest level in nearly 17 years, amid a resurgence in Covid-19 infections across the country.
The Institute for Supply Management (ISM) said on Tuesday its index of national factory activity dropped to a reading of 57.5 last month from of 59.3 in October, which had been the highest since November 2018. A reading above 50 indicates expansion in manufacturing, which accounts for 11.3 per ent of the US economy.
Economists polled by Reuters had forecast the index slipping to 58 in November.
The United States is in the grip of a fresh wave of Covid-19 infections, with more than 4 million new cases and over 35,000 coronavirus-related deaths reported in November, according to a Reuters tally. The virus is likely to disrupt production at factories. Manufacturing output is still about 5 per cent below its pre-pandemic level, according to the Federal Reserve.
Coronavirus infections are exploding at a time when more than US$3 trillion in government Covid-19 relief has run out. The fiscal stimulus helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls, leading to record economic growth in the third quarter.
The moderation in manufacturing activity, coming on the heels of data last week showing consumer spending cooling in October, supports expectations for a sharp deceleration in economic growth in the fourth quarter.
The economy grew at a historic 33.1 per cent annualised rate in the third quarter after contracting at a 31.4 per cent rate in the April-June period, the deepest since the government started keeping records in 1947. Growth estimates for the fourth quarter are mostly below a 5 per cent rate.
ISM's forward-looking new orders sub-index fell to a reading of 65.1 in November from 67.9 in October, which was the highest reading since January 2004. With orders ebbing, manufacturing employment contracted after expanding in October for the first time since July 2019.
ISM's manufacturing employment gauge dropped to a reading of 48.4 from 53.2 in October.
That fits in with economists' expectations that job growth slowed further in November. According to an early Reuters survey of economists, nonfarm payrolls probably increased by 500,000 jobs last month after rising 638,000 in October. Employment growth has cooled from a record 4.781 million new jobs in June.
About 12.1 million of the 22.2 million jobs lost in March and April have been recovered. The government is scheduled to publish November's employment report on Friday.