November ISM data was released this morning, with activity in the manufacturing sector remaining in a contraction that began in August. The PMI came in at 48.1 percent, a decrease of 0.2 percent from October, and New Orders registered 47.2 percent, 1.9 percentage points below the October reading.
Corcentric data on B2B transaction activity during November is consistent with ISM’s reporting. We began observing a moderation in manufacturing-related B2B activity in Q4 of last year, with most of 2019 failing to register meaningful growth in most manufacturing categories. The improving sentiment on the US-China trade war during October-November has not yet reversed manufacturers’ conservative posture. While the US consumer remains highly resilient, manufacturer inventories continue to decline, suggesting that manufacturers generally lack confidence in the timing and nature of the anticipated trade war resolution.
In the past two months, we anticipated some improvement in manufacturing-related B2B transaction volumes in response to an improved outlook on US-China trade discussions. However, Corcentric data on November manufacturer B2B commerce affirms ISM’s finding that November failed to continue the initial optimism from the October uptick in New Orders.
Particularly notable is the downtrend in manufacturing commodity prices – now in its sixth straight month of decline. We know that the Fed has essentially committed to low interest rates until inflation returns to above two percent on a sustained basis. Consequently, we anticipate that the US economy can continue to count on low interest rates for the foreseeable future since manufacturers have no need to raise prices on account of higher input costs.
Looking ahead, we anticipate strong holiday retail spending that will reaffirm the picture of good consumer strength. Assuming trade negotiations continue moving toward resolution, manufacturing-related sectors should gain additional confidence in ramping up spend in both investment and production activities.
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