U.S. Manufacturing Index Rises Slightly at End of Year
A gauge of U.S. factory activity rose for a second month in December as orders and production increased, suggesting the dark clouds over the manufacturing sector may be lifting.
The Institute for Supply Management’s manufacturing index rose nearly a point to 49.3, the highest level since March, according to data released Friday. While still below 50 and indicating activity continues to shrink, it was stronger than all but one estimate in a Bloomberg survey of economists.
The group’s new orders index rose more than 2 points to 52.5, the strongest reading since early last year and matching the highest since May 2022. Rising demand helped produce the first month of expanding production since May, according to the output index.
At the same time, the survey showed more manufacturers were reducing staffing levels at a faster pace. The employment index fell nearly 3 points, the most since July, to 45.3 in December. The five other indexes that make up the overall purchasing managers’ index all improved. “Demand is improving, production is in line with November performance (and company plans), staffing cuts are continuing (but coming to an end), and price growth is marginal,” Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee, said in a statement.
Seven industries reported contractions in December, led by textiles, fabricated metals and printing. Seven sectors expanded, including primary metals, electrical equipment and appliances. While the overall survey showed less pessimism among factory managers following Donald Trump’s presidential election victory, the path ahead may prove bumpy. Potential tariffs, weak overseas economies and the risk of a stronger dollar dampened enthusiasm about a more favorable regulatory environment and pro-business fiscal policy.
Manufacturers are also struggling with high costs. The ISM’s gauge of prices paid rose 2.2 points to 52.5. Meanwhile, inventory levels at manufacturers and their customers continued to contract. The ISM’s measure of customer stocks shrank at the fastest pace since July, suggesting there is room for orders to remain strong in the coming months.
Source: Bloomberg
