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ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the December 2024 Manufacturing ISM^® Report On Business^® .

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee:

“U.S. manufacturing activity contracted again in December, but at a slower rate compared to November. Demand showed signs of improving, while output stabilized and inputs stayed accommodative. Demand analysis includes: the (1) New Orders Index remaining in expansion territory, (2) New Export Orders Index increasing (up 1.3 percentage points and now ‘unchanged’), (3) Backlog of Orders Index slowing its rate of decline but continuing in contraction territory, and (4) Customers’ Inventories Index dropping into ‘too low’ territory. 

Output (measured by the Production and Employment indexes) was positive; factory output stabilized compared to November, indicating that panelists’ companies are executing to plan. Employment contracted as final head-count adjustments were likely taken to prepare for 2025. 

Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories and imports improving marginally (though remaining in contraction), prices increasing and supplier deliveries marginally slowing.

“Demand improved, production execution met November’s performance (and companies’ plans), de-staffing continued (but should end soon), and price growth was marginal. Fifty-two percent of manufacturing gross domestic product (GDP) contracted in December, down from 66 percent in November. The share of manufacturing sector GDP registering a composite PMI^® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 49 percent in December, a 1-percentage point increase compared to the 48 percent reported in November. None of the six largest manufacturing industries expanded in December, down from two in November,” says Fiore.

The seven manufacturing industries reporting growth in December — listed in order — are: Primary Metals; Electrical Equipment, Appliances & Components; Wood Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; and Plastics & Rubber Products. The seven industries reporting contraction in December — in the following order — are: Textile Mills; Fabricated Metal Products; Printing & Related Support Activities; Machinery; Chemical Products; Transportation Equipment; and Nonmetallic Mineral Products.

What Respondents Say

1. “Slightly lower due to seasonality and end-of-year destocking.” [Chemical Products]
2. “Automotive and powersport volume decreases.” [Transportation Equipment]
3. “We are seeing a softening in sales. This is concerning as it’s our peak season.” [Food, Beverage & Tobacco Products]
4. “We are constrained by technical labor, despite higher-than-normal backlog.” [Computer & Electronic Products]
5. “Significant slowdown in production requirements in the last two months of the year.” [Machinery]
6. “Order levels well below forecast projections.” [Fabricated Metal Products]
7. “The increase in new orders has our plant at full capacity.” [Electrical Equipment, Appliances & Components]
8. “Combo of seasonal factors plus increased demand outlook for 2025.” [Miscellaneous Manufacturing]
9. “There is definitely an uptick this month, though not a stable one.” [Primary Metals]
10. “The orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]

Numbers 1, 2, 3, 5, and 6 are negative. 4, 7, and 8 are positive. 9 and 10 seem neutral.

The overall report seems neutral. I wonder how many firms are scrambling to get ahead of tariff actions by trump.

Chicago PMI Crashes

The ISM manufacturing index, although in contraction is markedly better than the Chicago area PMI.

On December 30, I noted Chicago PMI Crashes to 36.9 vs Expected 42.7

The Chicago PMI ends the year on a very sour note with new orders the lowest since May 2020.

On the consumer side, Credit Card Defaults Surge to the Highest Level Since the Great Recession

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