U.S. factory activity slowed to a four-month low in November as higher prices because of tariffs on imports restrained demand, leading to a piling up of unsold goods that could hinder growth in the overall economy.
Relief for manufacturers is unlikely to come soon as the University of Michigan’s Surveys of Consumers separately showed on Friday (November 21, 2025) a sharp drop in buying conditions for long-lasting manufactured goods. The University of Michigan noted that “consumers remain frustrated about the persistence of high prices and weakening incomes.”
President Donald Trump’s sweeping import duties have raised prices, straining household budgets, especially for lower- and middle-income consumers. A robust stock market boosted spending for higher-income households, creating what economists called a K-shaped economy. But a recent sell-off has hurt confidence among wealthy Americans, and could restrain their spending.
“What’s going to happen is that people at the low end of the income spectrum will probably not spend very much,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “And given the uncertainty in the stock market, this is going to hurt even the spending of wealthier people, especially retirees.”
S&P Global said its flash U.S. manufacturing PMI slipped to 51.9 this month from 52.5 in October. A reading above 50 indicates growth in the manufacturing sector, which accounts for 10.2% of the economy. Trump has defended his protectionist trade policy as necessary to help revive the manufacturing industry.
Economists polled by Reuters had forecast the manufacturing PMI at 52.0. The survey’s measure of new orders received by factories dropped to 51.3 from 54.0 in October, while inventory was the highest in the survey’s history.
“Manufacturers reported a worrying combination of slower new orders growth and a record rise in finished goods stock,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “This accumulation of unsold inventory hints at slower factory production expansion in the coming months unless demand revives, which could in turn feed through to lower growth in many service industries.”
There is no spillover yet as business activity picked up again this month. The U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 54.8 from 54.6 in October.
Service sector is holding up
Services businesses offset the slowdown in manufacturing, with the PMI climbing to 55.0 from 54.8 last month.
The survey’s measure of new orders received by businesses increased to 55.0 from 53.6 last month. S&P Global noted a marked improvement in confidence in the year ahead, which it attributed to expectations for more interest rate cuts, the end of a 43-day shutdown of the government as well as “reduced worries over the political environment and hopes for increased policy support to business.” The survey was conducted from November 12 to November 20. Democrats swept a trio of races on November 4 in the first major elections since Trump regained the presidency. The off-year elections and end of the longest shutdown in history likely contributed to a slight improvement in consumer sentiment from earlier this month.
The University of Michigan’s Consumer Sentiment Index increased to 51 from 50.3 earlier in November, which was the lowest level in nearly 3-1/2 years. The index, however, was down from 53.6 in October. Current personal finances and buying conditions for durables both plunged more than 10%, but expectations for the future improved slightly.
“By the end of the month, sentiment for consumers with the largest stock holdings lost the gains seen at the preliminary reading,” said Joanne Hsu, director of the Surveys of Consumers. “This group’s sentiment dropped about two index points from October, likely a consequence of the stock market declines seen over the past two weeks.”
Inflation appears likely to remain elevated, at least in the near term, which could reduce the chances of the rate cut that businesses anticipated. A measure of prices asked by businesses for their products and services increased to 56.0 from 54.7 in October, the PMI survey showed. A gauge of prices paid for their inputs rose to 63.1 from 60.0 in the prior month.
Similarly, consumers in the University of Michigan survey expected higher inflation over the next 12 months. Their five-year inflation expectations, however, eased to a still-high 3.4% from 3.9% in October. Since the Federal Reserve cut rates in October, many policymakers have signalled wariness about further reductions in borrowing costs this year, with inflation still above the U.S. central bank’s 2% target.
The S&P Global survey also suggested no deterioration in the labour market, even though the unemployment rate hit a four-year high of 4.4% in September. The survey’s measure of private sector employment eased to 51.0 from 51.3 in October, with worries over costs related to tariffs cited as a constraint.
Published – November 22, 2025 11:10 pm IST
