The Institute for Supply Management released a report on Wednesday showing U.S. manufacturing activity contracted at a slightly faster rate in the month of December.
The ISM said its manufacturing PMI edged down to 48.4 in December from 49.0 in November, with a reading below 50 indicating a contraction. Economists had expected the index to slip to 48.5.
Manufacturing activity contracted for the second consecutive month after expanding for 29 straight months, with the manufacturing PMI falling to its lowest level since hitting 43.5 in May 2020.
“The U.S. manufacturing sector again contracted, with the Manufacturing PMI at its lowest level since the coronavirus pandemic recovery began,” said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
He added, “With Business Survey Committee panelists reporting softening new order rates over the previous seven months, the December composite index reading reflects companies’ slowing their output.”
The report said the new orders index fell to 45.2 in December from 47.2 in November, while the production index slid to 48.5 in December from 51.5 in November.
Meanwhile, the number of employees index climbed to 51.4 in December from 48.4 in November, indicating job growth in the manufacturing sector.
The ISM also said the prices index dropped to 39.4 in December from 43.0 in November, falling to its lowest reading since April 2020.
Paul Ashworth, Chief North America Economist at Capital Economics, called the decrease by the manufacturing PMI “another sign that the economy was losing momentum at the tail-end of last year.”
“Nearly all the survey-based evidence points to a complete stagnation or even contraction in activity,” Ashworth added.
On Friday, the ISM is scheduled to release a separate report on activity in the service sector in the month of December.
The services PMI is expected to slip to 55.0 in December from 56.5 in November, although a reading above 50 would still indicate growth.
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