Update: What does the ISM mean for the market? In an earlier post, I pointed out that the market tends to bottom at the same time as the ISM. With the ISM continuing to fall, that does not bode well for the stock market.

The US manufacturing sector contracted significantly in the month of November, as the nation’s manufacturers cut back on production at a faster pace than expected, according to the Institute of Supply Management’s manufacturing index. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. The PMI came in at 36.2%, down from 38.9% in October, its lowest level since May 1982 and clearly in recessionary levels. Economists were disappointed by the number, as forecasts had the number closer to 36.5%. Readings above 50% indicate growth, and anything below, contraction.

The Last 12 Months

Month PMI Month PMI
Nov 2008 36.2 May 2008 49.6
Oct 2008 38.9 Apr 2008 48.6
Sep 2008 43.5 Mar 2008 48.6
Aug 2008 49.9 Feb 2008 48.3
Jul 2008 50.0 Jan 2008 50.7
Jun 2008 50.2 Dec 2007 48.4
Average for 12 months — 46.9
High — 50.7
Low — 36.2

The November new-orders index plunged to 27.9% from 32.2% in October, the ISM’s data showed. The production index fell to 31.5% from 34.1%. Both are at multi-decade lows.

The employment index fell to 34.2% from 34.6%, after dropping 7.2 percentage points in October.

Via MarketWatch:

The prices index, which shows the prices that manufacturers pay, hit 25.5% in November, the lowest reading for the index since May 1949, showing that “commodity prices continue to decline at a rapid rate,” according to ISM. In October, the prices index was at 37.0%.

See Full Report.