TEMPE, Ariz. – The American manufacturing sector contracted in December for the 14th consecutive month. The Institute for Supply Management’s index came in at 47.4%, a slight easing from November, but still a decline. Any reading below 50 indicates a contraction.
As of October, the sector is in its longest stretch of decline since the Great Recession in 2008.
“The U.S. manufacturing sector continued to contract, but at a slightly slower rate in December as compared to November,” said Timothy R. Fiore, ISM chairman. “Companies are still managing outputs appropriately as order softness continues. Demand eased, with new orders contracting at a faster rate. Panelists’ companies maintained production levels month over month and continued actions to reduce head counts in December, primarily through layoffs.
“Suppliers continue to have capacity,” he continued. “84% of manufacturing GDP contracted in December, up from 65% in November.”
Only one of the 18 manufacturing industries recognized by the ISM reported growth for the month (primary metals). One reported no change, while the 16 others reported a decline, with furniture among them.
“Higher financing costs have diminished demand for residential investment,” said a wood product manufacturer. “Customers are delaying a portion of their plans until borrowing costs are reduced. We are impacted with reduced new orders, diminished backlog of orders and uncertain short-term demand for products and services.”
Furniture reported a decline in new orders and production output, while reporting no change in employment. It reported a decline in supplier delivery speeds and an increase in inventories. It was one of six industries to report that customer inventories are too high. The industry continues to report paying less for raw materials.
Despite the continued decline, manufacturers last month were overall optimistic about 2024, per the ISM. Per the report, 15 of 18 industries expect revenues to increase for the year, while 14 predict an increase in production output. Overall, 70% of respondents expect labor and benefit costs to grow in 2024, by an average of 5.9%.