US Factory Activity Shrinks the Most in Four Months Amid Weak Orders, Tariff Uncertainty

Core Insights - U.S. manufacturing activity contracted in November, marking the most significant decline in four months, indicating ongoing struggles within the sector [1] - The Institute for Supply Management's (ISM) manufacturing index decreased by 0.5 points to 48.2, remaining below the contraction threshold of 50 for nine consecutive months [2] Manufacturing Conditions - The manufacturing sector is hindered by trade policy uncertainty and high production costs, with customer demand described as "largely uninspiring," leading to a rapid contraction in orders [3] - Factory staffing levels saw a notable decline, with approximately 25% of respondents reporting reduced employment, the highest percentage since mid-2020 [4] Industry Performance - Eleven manufacturing industries contracted in November, with apparel and wood products leading the decline, while only four industries, including computer and electronic products, reported growth, the lowest number in a year [5] - The ISM index of prices paid for materials increased for the first time in five months, approximately eight points higher than the previous year, indicating rising costs [4] Strategic Responses - Manufacturers are implementing permanent changes such as staff reductions and increased offshore manufacturing in response to the tariff environment [5] - The unstable market conditions have led to volatile pricing and limited supplier options for raw materials, prompting manufacturers to adapt their supply chain strategies [5][6]