US Manufacturing Sector Contracts For 25Th Time In 26 Months

(MENAFN- Robotics & automation News) US manufacturing sector contracts for 25th time in 26 months

January 4, 2025 by Mark Allinson

Economic activity in the American manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months, according to a survey of the nation's supply executives.

The findings have been published in the latest Institute for Supply Management 's Report On Business, the key component of which is the purchase managers' index, or PMI. The report was issued by Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

The Manufacturing PMI registered 49.3 percent in December, 0.9 percentage point higher compared to the 48.4 percent 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 percent, 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 percent, 2.1 percentage points higher than the 50.4 percent recorded in November.

The December reading of the Production Index (50.3 percent) is 3.5 percentage points higher than November's figure of 46.8 percent. The index returned to expansion after six months in contraction.

The Prices Index continued in expansion (or 'increasing') territory, registering 52.5 percent, up 2.2 percentage points compared to the reading of 50.3 percent in November.

The Backlog of Orders Index registered 45.9 percent, up 4.1 percentage points compared to the 41.8 percent recorded in November. The Employment Index registered 45.3 percent, down 2.8 percentage points from November's figure of 48.1 percent.

The Supplier Deliveries Index indicated marginally slower deliveries, registering 50.1 percent, 1.4 percentage points higher than the 48.7 percent recorded in November.

Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.

The Inventories Index registered 48.4 percent, up 0.3 percentage point compared to November's reading of 48.1 percent.

The New Export Orders Index's“unchanged” reading of 50 percent is 1.3 percentage points higher than the 48.7 percent registered in November. The Imports Index remained in contraction territory in December, registering 49.7 percent, 2.1 percentage points higher than November's reading of 47.6 percent.

Fiore continues, US 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 (1) New Orders Index remaining in expansion territory, (2) New Export Orders Index increasing (up 1.3 percentage points and now“unchanged”), (3) Backlog of Orders Index slowing its rate of decline but continuing in contraction territory, and (4) Customers' Inventories Index dropping into“too low” territory.

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.

In conclusion, Fiore says:“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 percent in November.

“The share of manufacturing sector GDP registering a composite PMI calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 49 percent in December, a 1-percentage point increase compared to the 48 percent 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: