December PMI registered 47.2 percent, a decrease of 0.9 percentage point from the November reading of 48.1 percent, the lowest reading since June 2009’s 46.3 percent. New Orders Index came in at 46.8 percent, a decrease of 0.4 percentage points from the November reading of 47.2 percent. The Production Index was 43.2 percent, down 5.9 percentage points compared to November. The Backlog of Orders Index posted 43.3 percent, up 0.3 percentage points. The Employment Index registered 45.1 percent, a 1.5-percentage point decrease from the November reading of 46.6 percent. The Supplier Deliveries Index was 54.6 percent, up 2.6-percentage points. The Inventories Index was 46.5 percent, up 1 percentage point.
The Prices Index registered 51.7 percent, a 5-percentage point increase from the November reading of 46.7 percent. New Export Orders posted 47.3 percent, down 0.6-percentage point. The Imports Index came in at 48.8 percent, a 0.5-percentage point increase from the November reading of 48.3 percent.
“Comments from the panel were consistent with November, with sentiment improving compared to the third quarter. December was the fifth consecutive month of PMI® contraction, at a faster rate compared to the prior month. Demand contracted, with the New Orders Index contracting faster, the Customers’ Inventories Index remaining at `too low’ status and the Backlog of Orders Index contracting for the eighth straight month (and at similar rates to November). The New Export Orders Index contracted for the second month in a row, recording 10 months of poor performance and likely contributing to the faster contraction of the New Orders Index. Consumption (measured by the Production and Employment indexes) contracted, due primarily to lack of demand, contributing negatively (a combined 7.4-percentage point decrease) to the PMI® calculation. Inputs — expressed as supplier deliveries, inventories and imports — improved in December, due primarily to slowing contraction in inventories and supplier deliveries remaining in expansion territory. Imports contraction eased slightly. Overall, inputs indicate (1) supply chains began to stress in December and (2) companies remained cautious that materials received would be consumed by the end of the fourth quarter. Prices increased for the first time since May 2019, a positive for 2020.
“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. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Transportation Equipment is the weakest. Overall, sentiment this month is marginally positive regarding near-term growth,” says Fiore. – ISM
Only Three of 18 Industries Reporting Growth
Three reported growth in December: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The 15 industries in contraction reporting are listed in order: Apparel, Leather & Allied Products; Wood Products; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Textile Mills; Primary Metals; Chemical Products; Plastics & Rubber Products; and Machinery.
Hope remains high that the Phase 1 trade agreement with China will turn things. We are not so sure as there was nothing in the deal to really move the economic needle with exception of a toning down of the conflict.
See the full report here.