The US manufacturing sector’s eye recovery is in December (ISM). Manufacturing in the United States declined more in December, although the rate of decline eased amid a slight comeback in output and an increase in factory employment.
On Wednesday, the Institute for Supply Management (ISM) said that its manufacturing PMI rose to 47.4 last month after remaining constant at 46.7 for two months. The PMI remained below 50 for the 14th month, indicating a manufacturing decline. This is the longest such span, from August 2000 to January 2002.
Reuters polled economists, who predicted the index would rise to 47.1. According to the ISM, a PMI value below 48.7 over some time often implies a downturn in the overall economy. On the other hand, the ISM and other factory surveys are likely to exaggerate manufacturing’s downturn.
According to the so-called hard figures, manufacturing, which accounts for 10.3% of the GDP, is chugging ahead. Orders for long-lasting manufactured items increased significantly year over year in November. Though industry output has been sluggish, the severity of the decline has decreased in recent months.
The economy is still expanding at a 4.9% annualized pace in the third quarter. Growth forecasts for the October-December quarter are as high as 2.0%.
The forward-looking new orders sub-index of the ISM survey declined to 47.1 in December from 48.3 in November.
Factory output increased, with the sub-index rising to 50.3 from 48.5 in November. Production may increase further as a measure of customer inventories fell below the 50-point mark after climbing in November to what the ISM described as the upper end of “just right.”
Several firms mentioned the need to lower inventory levels in November. Subdued demand cut factory gate prices further, indicating that goods deflation may persist for some time. The survey’s manufacturing price index fell to 45.2 from a seven-month high of 49.9 in November.
The survey’s assessment of supplier deliveries increased slightly to 47.0 from 46.2 the previous month. A reading less than 50 suggests speedier delivery.
Factory employment increased but remained low due to attrition, hiring freezes, and layoffs. The index of manufacturing employment in the survey increased to 48.1 from 45.8 in November. In the government’s regularly watched jobs report, this metric has not been a good predictor of manufacturing payrolls.
According to a preliminary Reuters survey of analysts, manufacturing payrolls likely climbed by 5,000 jobs in December as the benefit from the return of striking United Auto Workers union members faded. In November, factory employment increased by 28,000 people.
According to Reuters, nonfarm payrolls are projected to have grown by 168,000 last month after increasing by 199,000 in November. The unemployment rate is expected to rise to 3.8%, up from 3.7% in the previous month.
On Friday, the government will release its much-expected December employment data.
