US manufacturing conditions worsen in December
US manufacturing activity shrank at an accelerated pace at the end of 2015, the results of the most widely-followed survey on conditions in the sector revealed on Monday, but some economists were still relatively optimistic.
The Institute for Supply Management’s manufacturing sector purchasing managers’ index dropped from a reading of 48.6 for November to 48.2 in December.
That was worse than the median forecast from economists for a rise to 49.1.
Readings below 50.0 in the PMI indicate that activity in the sector shrank, with readings below that threshold denoting successively quicker rates of contraction.
Monday’s print constituted the first two back-to-back readings below 50.0 since the beginning of the current economic upturn in July 2009.
A gauge of employment contained in the report retreated by 3.2 points to 48.1 although another linked to new orders at firms in the sector inched higher to 49.2.
The subindex for suppliers' shipments dipped by 0.3 percentage points.
Ian Sheperdson, chief economist at Pantheon Macroeconomics, attributed the declines in the employment and shipments components to seasonal factors.
Also on a positive note, he pointed out the rise in the subindex for new export orders and the uptick in new orders, adding that "This suggests the January ISM headline won't fall further, seasonals permitting."
"More broadly, the core story in manufacturing hasn't changed with the New Year; the sector remains under pressure from the strong dollar and the collapse in oil firms' capex. But the factors hurting manufacturers make consumers better off, and manufacturing accounts for only 12% of GDP; consumption is 69%.
"The chart shows that China’s PMI, which is a good guide to the underlying trend in the ISM, points to little change in the key new orders index over the next couple of months," Sheperdson said.
"This morning’s report, while weaker than expected, is consistent with our view that the US manufacturing sector is likely to trend slightly negative for some time as manufacturing continues to adjust to the strength in the dollar," was the verdict from Barclays's Rob Martins.