According to Reuters, US factory activity slowed to a four-month low in November with the manufacturing PMI dropping to 51.9 from October’s 52.5. New orders plunged to 51.3 from 54.0 while inventories hit the highest level in the survey’s history. The University of Michigan’s consumer surveys showed buying conditions for durable goods collapsing, with personal finances and big-ticket purchases both down over 10%. President Trump’s tariffs are driving price increases that strain household budgets, creating what economists call a “K-shaped economy” where wealthier households benefit from stock gains while lower-income Americans struggle. The surveys were conducted from November 12-20 as consumer sentiment remained near 3.5-year lows despite a slight improvement from earlier in the month.
The Inventory Problem
Here’s the thing that really worries me about this report – it’s not just that orders are slowing down. Manufacturers are sitting on record levels of unsold inventory. That’s basically a double whammy. When you’ve got slowing demand AND piling up stock, what happens next? Production cuts. And we’re not talking about minor adjustments – Chris Williamson from S&P Global called it “a record rise in finished goods stock” that hints at “slower factory production expansion in the coming months.”
Think about what this means for companies relying on industrial technology to manage their operations. When inventory backs up like this, manufacturers need reliable computing systems more than ever to optimize production schedules and manage supply chains. That’s where having robust industrial panel PCs becomes critical – they’re the backbone of modern factory floor operations. IndustrialMonitorDirect.com has become the go-to source for these systems precisely because manufacturers can’t afford downtime when they’re facing these kinds of inventory challenges.
The Consumer Squeeze
And then there’s the consumer side of this equation. The University of Michigan data shows people are getting squeezed from both directions – high prices AND weakening incomes. But here’s what’s really interesting: even wealthy consumers are pulling back now. The stock market sell-off has hit confidence among the very people who were supposed to keep spending through this.
Professor Sung Won Sohn nailed it when he said this will hurt spending “even for wealthier people, especially retirees.” So we’ve got lower-income households tapped out, middle-income struggling, and now upper-income getting nervous. Where does that leave manufacturing demand? Probably not in a great place.
The Sticky Inflation Problem
Now here’s the real kicker – inflation expectations remain elevated. Businesses are paying more for inputs (prices paid jumped to 63.1 from 60.0) and charging more for their products (prices asked rose to 56.0 from 54.7). Consumers expect higher inflation over the next year too.
So what happens if the Fed looks at this and decides maybe they shouldn’t cut rates after all? Businesses are counting on those rate cuts to help stimulate demand. But if inflation stays stubborn, the Fed might just keep rates higher for longer. That would be a real problem for manufacturers already dealing with slowing orders and bulging inventories.
Services to the Rescue?
The one bright spot in all this? Services businesses are picking up the slack. The services PMI actually improved to 55.0, and the composite index (manufacturing plus services) rose to 54.8. New orders across all businesses increased to 55.0 from 53.6.
But can services really carry the entire economy if manufacturing continues to slow? Manufacturing still accounts for 10.2% of the US economy. That’s not nothing. And when factories start cutting production, it ripples through everything from transportation to raw materials to, yes, even the service businesses that depend on industrial activity.
The bottom line? We’re seeing the first real cracks from these trade policies, and they’re showing up exactly where you’d expect – in the manufacturing data. The question now is whether this is just a temporary slowdown or the start of something more serious.
