Economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months, according to the latest Manufacturing Report On Business by the Institute for Supply Management (ISM). The report was issued by Timothy R. Fiore, chair of the ISM manufacturing business survey committee.
“The manufacturing PMI registered 49.3% in December, 0.9 percentage point higher compared to the 48.4% recorded in November. The overall economy continued in expansion for the 56th month after one month of contraction in April 2020. (A manufacturing PMI above 42.5%, over a period of time, generally indicates an expansion of the overall economy.) The new orders index continued in expansion territory for the second month after seven months of contraction, strengthening to 52.5%, 2.1 percentage points higher than the 50.4% recorded in November,” Fiore said. “The December reading of the production index (50.3%) is 3.5 percentage points higher than November’s figure of 46.8%. The index returned to expansion after six months in contraction. The prices index continued in expansion (or ‘increasing’) territory, registering 52.5%, up 2.2 percentage points compared to the reading of 50.3% in November. The backlog of orders index registered 45.9%, up 4.1 percentage points compared to the 41.8% recorded in November. The employment index registered 45.3%, down 2.8 percentage points from November’s figure of 48.1%.”
“The supplier deliveries index indicated marginally slower deliveries, registering 50.1%, 1.4 percentage points higher than the 48.7% recorded in November. (Supplier deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The inventories index registered 48.4%, up 0.3 percentage point compared to November’s reading of 48.1%,” Fiore said. “The new export orders index’s ‘unchanged’ reading of 50% is 1.3 percentage points higher than the 48.7% registered in November. The Imports index remained in contraction territory in December, registering 49.7%, 2.1 percentage points higher than November’s reading of 47.6%.”
“U.S. manufacturing activity contracted again in December, but at a slower rate compared to November. Demand showed signs of improving, while output stabilized and inputs stayed accommodative. Demand analysis includes: the new orders index remaining in expansion territory, new export orders index increasing (up 1.3 percentage points and now ‘unchanged’), backlog of orders index slowing its rate of decline but continuing in contraction territory and customers’ inventories index dropping into ‘too low’ territory,” Fiore said. “Output (measured by the production and employment indexes) was positive; factory output stabilized compared to November, indicating that panelists’ companies are executing to plan. Employment contracted as final head-count adjustments were likely taken to prepare for 2025. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories and imports improving marginally (though remaining in contraction), prices increasing and supplier deliveries marginally slowing.”
“Demand improved, production execution met November’s performance (and companies’ plans), de-staffing continued (but should end soon) and price growth was marginal. Fifty-two percent of manufacturing gross domestic product (GDP) contracted in December, down from 66% in November,” Fiore said. “The share of manufacturing sector GDP registering a composite PMI calculation at or below 45% (a good barometer of overall manufacturing weakness) was 49% in December, a one-percentage point increase compared to the 48% reported in November. None of the six largest manufacturing industries expanded in December, down from two in November.”
The seven manufacturing industries reporting growth in December — listed in order — are:
Primary metals
Electrical equipment, appliances & components
Wood products
Furniture and related products
Paper products
Miscellaneous manufacturing
Plastics and rubber products
The seven industries reporting contraction in December — in the following order — are:
Textile mills
Fabricated metal products
Printing and related support activities
Machinery
Chemical products
Transportation equipment
Nonmetallic mineral products
