December ISM Manufacturing PMI Lowest Since May 2020, Second Straight Month Sub-50.0%

The December ISM Manufacturing Index dropped to 48.4% (consensus 48.5%) from 49.0% in November, reflecting a general contraction in manufacturing activity. The ISM hit its lowest level since May 2020 and marks the second straight month with a sub-50.0% reading. The result was consistent with the regional Chicago PMI’s fourth consecutive month of contraction in business activity in the Chicago region. Though it increased to 44.9 points in December the weakness is deep, recovering slightly from a 30-month low of 37.20 points hit in November and compared to market forecasts of 40.

The manufacturing activity contraction for the second straight month is demonstrating that the cumulative effect of rate hikes around the globe is adversely impacting demand while at the same time curtailing inflation pressures.

 December ISM Manufacturing Index Highlights

  • ISM Manufacturing PMI 48.4 vs. 48.5 estimate Prior month 49.0
  • The New Orders Index decreased to 45.2% from 47.2%.
  • The Prices Index fell to 39.4% from 43.0%, hitting its lowest level since April 2020.
  • The employment 51.4 vs. 48.3 estimate. Last month 48.4
  • The new orders 45.2 vs. 47.2 last month
  • The production 48.5 vs 51.5 last month
  • The order backlog 41.4 vs. 40.0 last month
  • The new export orders 46.2 vs. 48.4 last month
  • The imports 45.1 versus 46.6 last month

PMI Survey Respondents Comments

“Skilled labor shortages are huge, putting a lot of pressure on existing personnel. Electronic components still a major supply chain issue, particularly if the component you need is not the current hot technology.” [Computer & Electronic Products]

“Customer demand continues to be depressed. While 2023 pipeline is looking very positive, current demand is significantly down.” [Chemical Products]

“Orders are really slowing down in the original equipment sector. We haven’t seen a major output decrease because we are still eating away at our back orders.” [Transportation Equipment]

“Lead times are returning to normal for most of our suppliers, while some of our smaller suppliers are struggling to remain staffed up enough to keep up with orders.” [Food, Beverage & Tobacco Products]
“The continued uncertainty in the economy has resulted in customers delaying their commitments for capital purchases, which is impacting our fourth quarter sales and lowering our forecast for the first quarter of 2023.” [Machinery]

“Business is slowing down and forecast to decrease by the end of the first quarter or second quarter.” [Fabricated Metal Products]

“Trying hard to keep the wheels moving to close out the year strong. The manufacturing plants are nearing their annual outage periods, and some TLC is needed to keep things running.” [Nonmetallic Mineral Products]

“Finished the year strong, and we are pleased with how the year shaped up.” [Primary Metals]
“New China technology trade restrictions have impacted our business and plans going forward.” [Electrical Equipment, Appliances & Components]

“Overall, supply chain conditions have stabilized tremendously since the fourth quarter of 2021. Issues remain, but the list is quite a bit shorter. Customer demand is very strong, and the outlook is positive for 2023. There is large focus on margin recovery after this period of high inflation.” [Miscellaneous Manufacturing]

Source ISM World

From The TradersCommunity News Desk