According to the Purchasing Managers Index from the Institute for Supply Management the U.S.manufacturing sector slipped further into contraction in November with the index dropping to 48.1 in November from 48.3 in October. That was a fourth-straight monthly contraction for the index. (Anything below 50 signals contraction. Above 50 points to an expansion.)
On the other hand, the purchasing managers index calculated by IHS Markit climbed in November for a third straight month to a seven-month high of 52.6. That’s well into expansion territory.
Wall Street was inclined today to go with the ISM survey. That index is more familiar and has a longer track record. (Unfortunately, when comes to understanding the methodology of each index each is something of a black box.) Plus its reading of contraction matches anecdotal evidence, including comments from CEOs, that manufacturing is slumping. And it makes sense that manufacturing would be slowing with the United States and China locked in a trade war.
The ISM survey result makes more sense to me too. But I’m warning myself against confirmation bias–the tendency to interpret data to conform with the way you think the world is trending at the moment. In other words I’d keep that contrary index from IHS Markit in my back pocket at the moment rather than dismissing it. I’d certainly keep it in mind when I read financial reports and guidance from manufacturing companies in January.