US manufacturing sector slips into contraction again

03 December 2012 16:21  [Source: ICIS news]

WASHINGTON (ICIS)--The US manufacturing sector slipped into decline in November, a key production survey report said on Monday, with chemical and plastics producers among a range of industries showing contraction.

The decline in overall US manufacturing last month marked the fourth downturn in the last six months.

In its monthly report on the nation’s manufacturing sector, the Institute for Supply Management (ISM) said that its closely watched purchasing managers index (PMI) fell to 49.5% last month from the October reading of 51.7%.

The new contraction in manufacturing follows a two-month gain in September and October and the three-month slump in June, July and August when the index was below 50%.

The purchasing managers index is a composite of supplier responses to the institute’s survey on 10 different business performance measures in 18 major manufacturing industries.

A PMI reading at or above 50% indicates that the nation’s crucial manufacturing sector is expanding.

The mid-year period of contraction was the first downturn in production since the end of the recession in June 2009. 

Economists had hoped that the mid-year manufacturing slump had been ended with the PMI gains in September and October.

ISM survey director Bradley Holcomb said that the new contraction was attributed to slowing demand and continuing concern among manufacturers “over how and when the fiscal cliff issue will be resolved”.

The so-called fiscal cliff is a combination of automatic income tax increases and cuts in federal government spending that will kick in on 1 January, unless Congress and the White House can agree on terms to lessen the blow.

Economists estimate that if the tax increases and spending cuts take force, some $800bn (€616bn) will be taken out of the US economy and probably result in a new recession in the first half of 2013.

Holcomb said that among the ten business performance areas measured by the survey, there were declines in new orders, order backlogs, hiring, inventories, prices and exports.

An unidentified chemicals industry executive was quoted as saying that “Global economic uncertainty still seems to be sticking around.” The official said global uncertainty “is not making things better from a demand standpoint”.

An executive in the plastics and rubber products sector said that “differences between the first half of the year and the remaining half are very dramatic”, noting that there has been a general decline since the middle of the year.

($1 = €0.77)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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