While a reading below 50 indicates a contraction in manufacturing, the index remains above 43.1, which is associated with a recession. The employment index fell to 48.1 from 51.3 in November. In the United Kingdom, manufacturing unexpectedly cooled in December, suggesting it made little contribution to the economy in the final quarter of 2015. The 10 industries reporting contraction in December – listed in order – are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Primary Metals; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Wood Products; and Nonmetallic Mineral Products. Economists polled by Reuters had forecast construction spending rising 0.6% in November after a previously reported 1% increase in October.
Advertisement
Manufacturers in the petroleum and coal products sector said low oil prices were “negatively” impacting oil and gas exploration activities.
“The collapse in oil prices and in the demands for pipe and metals pieces in the oil industry weighs on United States manufacturing”. “This is resulting in [a] reduction in workforce and furloughs”.
It’s not just the US, either.
Manufacturing ISM(R) Report On Business(R) data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries indexes. Prices were down for a number of commodities, including aluminum, brass, copper, crude oil, diesel and gasoline.
Manufacturing in the USA contracted in December at the fastest pace in more than six years as factories, hobbled by sluggish global growth, cut staff at the end of 2015.
The ISM is scheduled to release a separate report on service sector activity in the month of December on Wednesday. Holcomb stated, “The past relationship between the PMI(R) and the overall economy indicates that the average PMI(R) for January through December (51.4 percent) corresponds to a 2.6 percent increase in real gross domestic product (GDP) on an annualized basis”.
“As this aspect is not captured by the ISM survey, we think that the latter underestimates the underlying pace of activity”.
The new orders subcomponent fell to 50.2 from 53.1, the lowest since Sept 2009.
“We expect the non-manufacturing index to remain well above 50 in this week’s report for December”.
Advertisement
Later this week the USA government is expected to report that the economy added another 200,000-plus new jobs in December. The index rose to 51 from 47.5 in November.
