#United States #Tempe #Manufacturing PMI #ISM Report #Economic Outlook

December 2024 Manufacturing Sector Overview

The Institute for Supply Management (ISM) released its Manufacturing ISM® Report On Business® for December 2024, revealing that the manufacturing sector experienced contraction for the ninth consecutive month, while simultaneously showing some signs of recovery in specific areas. The Manufacturing PMI® rose slightly to 49.3%, up from 48.4% in November, indicating that while the overall manufacturing economy is still contracting, the rate of decline has slowed.

Key Findings from the Report

• - New Orders Index increased to 52.5%, suggesting a positive turnaround as this marks the second month of growth following seven months of contraction.
• - Production Index improved significantly to 50.3%, indicating expansion after a prolonged contraction.
• - However, the Employment Index fell to 45.3%, reflecting continued reductions in workforce numbers across the sector as companies adjust to changing market conditions.
• - Despite these shifts, supplier deliveries are slowing, with the index at 50.1%, signaling that supply chains are still adapting to current demands.

Insights from Sector Leaders

Manufacturing executives provided insights that underscore a complex landscape. Many cited seasoned declines attributed to year-end adjustments and certain sector-specific challenges. For instance, the transportation equipment sector noted decreased demand, whereas electrical equipment manufacturers reported increased new orders, indicating varied health across industries.

Industry Performance

Among the manufacturing sectors, seven reported growth in December, including primary metals and electrical equipment. In contrast, industries such as textile mills and transportation equipment experienced notable contractions. This disparity suggests that while some sectors are recovering, others remain under pressure.

Economic Implications

The findings reveal a somewhat optimistic outlook as the New Orders Index reflects increased demand. The correlation with overall economic growth remains strong; a Manufacturing PMI® above 42.5% typically indicates that the economy is expanding. Thus, despite ongoing challenges like job cuts and inventory contraction—depicted by an Inventories Index of 48.4%—the overall economy continues to expand for the 56th month since the last significant contraction.

Conclusion

The Manufacturing ISM® Report illustrates that while December's data still point to contraction within the manufacturing sector, key indexes such as new orders and production are on the rise, hinting at a potential stabilization as we approach 2025. Analysts will watch for continued developments and adjustments as production strategies adapt to these shifting dynamics. Employing a careful monitoring approach will be critical for manufacturers as they navigate through this mixed economic environment.