Economic Report: ISM shows weakness in U.S. factory activity spreading in December

by | Jan 4, 2023 | Stock Market

The numbers: A closely-watched index that measures U.S. manufacturing activity slipped to 48.4 in December from 49 in the prior month, according to the Institute for Supply Management on Wednesday. This is the lowest level since May 2020. Any number below 50% reflects a shrinking economy. Economists surveyed by the Wall Street Journal had forecast the index to inch down to 48.8. 

The sector had contracted in November for the first time since May 2020. Key details: New orders, production and employment all fell in December. Supplier deliveries fell to the lowest level since 2009, showing that firms received their orders more quickly. That means that manufacturers are not stressed to meet their orders. The prices companies pay for raw materials and other supplies continued to drop, falling to the lowest level since the pandemic. The employment index picked up in December. Only two manufacturing sectors reported growth in December. Thirteen industries reported contraction. Big picture: The ISM gauge has been trending lower for months as rising interest rates are weighing on sales and orders. The weakness in the factory sector is spreading to more and more industries. The lower prices will continue to push down core goods prices. Buyers now have pricing power. What the ISM said: “This is a weak slowdown,” said Timothy Fiore, the chair of the ISM’s surve …

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