US Manufacturing PMI Rises Slightly in December but Remains in Contraction for Ninth Consecutive Month

The US manufacturing sector continued its contractionary trend in December, as indicated by the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI®), which registered 49.3%. This marks a 0.9 percentage point increase from November’s 48.4%, slightly exceeding market expectations. However, the reading remains below the 50.0 benchmark, signaling contraction for the ninth straight month and the 25th time in the past 26 months.

Mixed Signals from Subindices

The December PMI® data revealed mixed results across its subcomponents. The New Orders Index climbed to 52.5%, signaling expansion for the second consecutive month following seven months of contraction. Similarly, the Production Index returned to growth, reaching 50.3%—a 3.5 percentage point increase from November.

Despite these gains, the Employment Index continued to reflect contractionary conditions, dropping sharply to 45.3%, its lowest level in recent months. Meanwhile, the Prices Index rose to 52.5%, indicating a resurgence of input cost pressures for manufacturers.

Broader Economic Context

According to ISM, the December reading corresponds to an annualized real GDP growth rate of 1.9%. While this points to modest economic expansion, challenges remain evident within the manufacturing sector. None of the six largest manufacturing industries reported growth during the month, underscoring the continued difficulties faced by the industry.

The Backlog of Orders Index showed slight improvement, climbing to 45.9% from November’s 41.8%, yet still remained in contraction. Inventories also contracted at a slower pace, with the Inventories Index registering 48.4%, while the Customers’ Inventories Index fell to 46.7%, indicating that inventory levels are viewed as insufficient, potentially supporting future demand.

A Sector in Transition

December marked the 56th consecutive month of economic growth for the broader economy, even as the manufacturing sector grappled with headwinds. Supplier performance showed little change, with the Supplier Deliveries Index edging up to 50.1%, while employment contraction highlighted persistent labor market challenges.

In summary, while the US manufacturing sector displayed modest signs of improvement in December, the overall picture remains one of stagnation. Rising costs and employment weakness continue to weigh on the sector, leaving manufacturers cautious about growth prospects in the months ahead.