KPI – December 2024: The Brief
KPI – December 2024: Recent Vehicle Recalls
KPI – December 2024: State of Business – Automotive Industry
KPI – December 2024: State of the Economy
KPI – December 2024: Consumer Trends
Economic activity in the manufacturing sector contracted in November for the eighth consecutive month and the 24th time in the last 25 months, say the nation’s supply executives in the latest Manufacturing ISM Report on Business.
“U.S. manufacturing activity contracted again in November, but at a slower rate compared to (October). Demand continues to be weak but may be moderating. Output declined again and inputs stayed accommodative,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
According to Fiore, “demand remains weak,” as companies prepare plans for 2025 with the benefit of the election cycle ending. He says production execution eased in November, consistent with demand sluggishness and weak backlogs.
Data shows suppliers continue to have capacity with lead times improving, but some product shortages are reappearing.
“(Approximately) 66% of manufacturing gross domestic product (GDP) contracted in November, up from 63% in October. The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 48% in November, a two-percentage-point increase compared to the 46% reported in October,” Fiore explains.
According to new estimates from Kelley Blue Book, electric vehicle (EV) sales in the U.S. grew by 11% year-over-year in the third quarter and reached record highs for both volume and market share. According to the latest counts, an estimated 346,3091 EVs were sold in Q3 2024, a 5% increase from Q2. The EV share of sales in Q3 hit 8.9%, the highest level recorded and an increase from 7.8% in Q3 2023.
Image Source: EV Club CT at Tesla Cybertruck Reveal Event | EV Club CT
Important takeaways, courtesy of the Manufacturing ISM Report on Business:
- Positive signs for demand include the (1) New Orders Index returning to expansion territory, (2) New Export Orders Index increasing moderately (up 3.2 percentage points but still in contraction territory), (3) Backlog of Orders Index dipping further into strong contraction territory and (4) Customers’ Inventories Index indicating levels were only marginally above “too low.”
- Output (measured by the Production and Employment indexes) continued in contraction: Employment shrunk but at a much slower rate – and production took a small step in the right direction. Foundational industries like Chemical Products and Fabricated Metal Products (that provide products and components across the manufacturing sector) continued to show weakness, indicating recovery may still be two to three months away.
- Inputs – defined as supplier deliveries, inventories, prices and imports – generally continued to accommodate future demand growth, with inventories improving and suppliers continuing to improve delivery performance.
What respondents are saying, according to the Manufacturing ISM Report on Business:
- “High mortgage rates continue to hamper demand for new housing construction, which is a key market for adhesives and sealants.” (Chemical Products)
- “Business remains slow. We anticipate that the first half of 2025 will be similar and hope that demand increases in the second half of 2025.” (Transportation Equipment)
- “Inflation, even after easing, continues to impact demand. Consumers are looking for value and purchasing behaviors are changing as many shoppers reduce consumption, causing softer volume.” (Food, Beverage & Tobacco Products)
- “Backlog is rising precipitously after 18 months of troughing. The long-awaited pent-up buying has started. Competition for qualified technical labor is a constraint on operational throughput.” (Computer & Electronic Products)
- “A general construction slowdown in the fourth quarter has created a surplus of finished goods, creating the need for an extra two weeks of shutdown over the Christmas holiday period. We are carefully watching demand in the first quarter to determine if more permanent workforce reductions will be necessary.” (Machinery)
- “Business is slowing as customers destock and appear uncertain about near-term demand. Preliminary forecast for 2025 is down significantly; we hope to see improvements now that we are beyond U.S. election uncertainties.” (Fabricated Metal Products)
- “Our supplier has a positive outlook on the U.S. economy going into 2025. Our business is seeing an uptick in sales forecasts for the first quarter of 2025 versus the fourth quarter of 2024. Overall, our outlook for 2025 is optimistic.” (Textile Mills)
- “We’re finally seeing traction in the last few weeks (with) a higher volume of orders. Backlog is starting to grow.” (Electrical Equipment, Appliances & Components)
- “Late to the game, we are now working on our buying plan in light of potential increased tariffs on imports from China. Cost and capacity of U.S. manufacturing is a concern; a lack of relationship with alternate low-cost international manufacturers is another.” (Miscellaneous Manufacturing)
- “After the election, we have seen an uptick in customers wanting to come back to the U.S. for making their products. We are working through these inquiries. They seem very motivated.” (Primary Metals)