U.S. Manufacturing Activity Falls to a 10-Year Low

U.S. manufacturing activity contracted for a fifth straight month in December, according to the Institute for Supply Management’s December survey of manufacturing executives.

The ISM’s report, released Friday, January 3rd, finds last month’s gauge of U.S. manufacturing activity edged down 0.9% to 47.2%. This is the lowest the index has been since June of 2009.

Since August 2019, manufacturing activity in the U.S. has been hovering below the 50% mark that is indicative of contraction, according to the ISM.

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New orders, production and employment are all in contraction, while supplier deliveries have slowed and both exports and imports are contracting.

Said Timothy Fiore, Chairman of the ISM: “Overall sentiment this month is marginally positive regarding near-term growth…Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China.”

Of eighteen industries, just three reported growth in December. Contraction was sharpest in apparel, leather & allied products; wood products and printing/related support activities. The three industries reporting growth were food, beverage & tobacco products; miscellaneous manufacturing; and computer & electronic products.

What U.S. Manufacturers are Saying:

The ISM’s report included several responses from manufacturing executives across a spectrum of industries. Many respondents expressed optimism for 2020, though concerns over tariffs and economic uncertainty persisted.

Said one respondent in the transportation equipment industry: “Cautiously optimistic is the rule these days. Sales are decent, but we’re wondering what 2020 will bring. Still hedging it will be successful – but maybe not as much as this year.”

Another in the textiles sector stated: “Our outlook for the first quarter of 2020 is positive. We have secured contracts for a number of former customers and expect sales growth of about 5 percent over Q4 of 2019.”

Said another in the food processing industry: “Starting to see suppliers pass on costs associated with tariffs. Uncertainty on the trade front continues to keep agricultural markets on the defensive."

New Orders Sink in December

The ISM’s New Orders Index edged down 0.4% in December, and now stands at 46.8%. December marks the fifth consecutive month of contraction for the index, though new orders contracted to a lesser degree in December.

November’s reading found new orders fell 1.4% in November.

Only three of eighteen industries reported growth in new orders. Contraction was led by wood products; furniture & related products; and non-metallic mineral products. The three industries reporting growth were textile mills; food, beverage & tobacco products; and miscellaneous manufacturing.

Manufacturing Production Sinks

The ISM’s Production Index fell precipitously in December, sinking 5.9% to 43.2% -- a level not seen since the end of the recession in 2009.

This is the fifth month the ISM’s reading on production has contracted, with declining output led by apparel, leather & allied products; wood products; and non-metallic mineral products.

The three industries reporting a rise in production were miscellaneous manufacturing; food, beverage & tobacco products; and machinery.

Employment Index Sinks

Manufacturing employment moved into its fifth straight month of contraction in December, with that reading falling 1.5% to a current level of 45.1%.

Plastics & rubber products and computer & electronic products were the only two industries to report expanded hiring in December.

Employment contraction was sharpest in apparel, leather & allied products; wood products; and printing/related support activity.

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