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  • U.S. manufacturing sector shrinks for 14th straight month in December

    U.S. manufacturing sector shrinks for 14th straight month in December

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    The numbers: A closely watched index that measures U.S. manufacturing activity rose by 0.7 percentage point to 47.4 in December, according to the Institute for Supply Management on Wednesday.

    Economists surveyed by the Wall Street Journal had forecast the index to rise to 47.2. 

    Any number below 50 reflects a shrinking economy. Manufacturing has contracted for 14 straight months.

    Key details: The key new-orders index fell 1.2 percentage points to 47.1 in December.

    Production rose 1.8 percentage points to 50.3 from the prior month. Employment picked up slightly but remained below the 50-percentage-point threshold.

    Prices fell 4.7 percentage points to 45.2. That’s the biggest drop since May 2023. Inventories were down 0.5 percentage point to 44.3 in December.

    Customer inventories dipped back below 50 last month to 48.1 in December.

    Only one industry, primary metals, reported growth in December, while 16 reported contractions.

    Layoffs picked up in December, concentrated in the computer and electronics, machinery, and food and beverage sectors.

    Big picture: The contraction in manufacturing is the longest since 2000-01, after the dot-com bubble exploded, said Jay Hawkins, senior economist at BMO Capital Markets.

    Economists said that depressed capital spending has been the key drag on the factory sector, along with weak global trade. They expect that a sharp drop in long-term interest rates will improve the picture, but the change won’t happen overnight.

    What the ISM said: Tim Fiore, chair of the ISM manufacturing survey committee, was relatively upbeat about the data. He said the sector was closing the year in a “really good position” and forecast that the ISM factory index would rise above the 50-percentage-point threshold by March. Fiore said he also expects the inventory number to pick up in coming months.

    What economists said: “The survey indicates that conditions in the factory sector remain unusually weak and that output is likely to continue declining for at least a few more months,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

    Market reaction: Stocks
    DJIA

    SPX
    were lower in early trading on Wednesday, while the yield on the 10-year Treasury note
    BX:TMUBMUSD10Y
    rose to just below 4%.

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  • Health of several key sectors, including the U.S. consumer, plus an outlook from Fed’s Powell on radar this coming week

    Health of several key sectors, including the U.S. consumer, plus an outlook from Fed’s Powell on radar this coming week

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    Recession fears are rising. Nothing beats fear better than good information and that’s what we will get this week. Investors and economists will get good insight into the mood of U.S. consumers and hear the last words of Federal Reserve Chair Jerome Powell ahead of the central bank’s next interest-rate meeting on Dec. 12-13.

    November consumer confidence

    Tuesday, 10:00 a.m. Eastern

    Economists surveyed by the Wall Street Journal expect that consumer’s view on the outlook have soured over the past few weeks. Geopolitical…

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  • Philadelphia Fed’s manufacturing gauge remains deep in contraction territory in March

    Philadelphia Fed’s manufacturing gauge remains deep in contraction territory in March

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    The numbers: The Philadelphia Fed said Thursday its gauge of regional business activity inched up to negative 23.2 in March from negative 24.3 in the prior month. Any reading below zero indicates improving conditions. This is the seventh straight negative reading and the ninth in the last ten months.

    Key details: Broad indicators in the data were all negative in March. The barometer on new orders sank to negative 28.2 in March from negative 13.6 in the prior month. The shipments index sank to negative 25.4 from 8. The measure…

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  • New York Empire State factory gauge drops sharply in January signaling deep contraction in activity

    New York Empire State factory gauge drops sharply in January signaling deep contraction in activity

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    The numbers: The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, tumbled 21.7 points to negative 32.9 in January, the regional Fed bank said Tuesday. 

    This is the lowest level since the worst of the pandemic in May 2020 and among the lowest levels in the survey’s history, the regional Fed bank said.

    Economists had expected a reading of negative 7, according to a survey by The Wall Street Journal.

    Any reading below zero indicates contraction.

    Key details: The new orders index fell 27.5 points to negative 31.1 in January. Shipments fell 27.7 points to negative 22.4.

    The indexes for prices paid and prices received moved lower.

    The employment gauges were also weak.

    Firms expect little improvement in coming months, with the futures index at 8.

    Big picture: The Federal Reserve’s steady increase in interest rates is having a slowing impact on capital spending as firms are scaling back investment, economists said. Demand for goods is also slowing after two strong years on the weak global economy. Added to the mix is the strong dollar which makes U.S. exports more expensive.

    The market pays attention to the Empire State index because it is seen as a early read on the national ISM manufacturing index to be released early next month.

    The ISM factory index contracted in December for the second straight month, falling to 48.4% from 49% in the prior month.

    Looking ahead: “Manufacturing conditions in the U.S. are deteriorating and the worst is likely ahead,” said Gurleen Chadha, economist at Oxford Economics.

    Market reaction: U.S. stocks
    DJIA,
    -1.14%

    SPX,
    -0.20%
    opened lower on Tuesday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.489%
    retreated to 3.51% after reaching 3.57% in early morning trading.

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  • U.S. manufacturing barely expands in October, ISM says

    U.S. manufacturing barely expands in October, ISM says

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    The numbers: A closely-watched index that measures U.S. manufacturing activity fell 0.7 percentage points to 50.2 in October, according to the Institute for Supply Management on Tuesday.

    Economists surveyed by the Wall Street Journal had forecast the index to inch down to 50. Any number below 50% reflects a shrinking economy.

    It is the lowest level since May 2020.

    Key details: The index for new orders remained in contraction territory, rising 2.1 points to 47.1. The production index rose 1.7 points to 52.3.

    The employment index rose 1.3 points to 50 in October.

    Supplier deliveries fell 5.6 points to 46.8 in October. This is the first time that deliveries were in a “faster” territory since February 2016.

    The price index dropped 5.1 points to 46.6., also the lowest reading since the pandemic. Pricing power is shifting back to the buyer, the ISM said.

    Only 8 of the 18 manufacturing industries reported growth in October.

    Big picture: Manufacturing has been slowing recently led by softening business spending and fading demand for consumer goods. Economists think it is inevitable the index slips below the 50 threshold.

    In a separate data, the S&P global U.S. manufacturing PMI inched up to 50.4 in its “final” reading in October from the “flash” reading of 49.9. This is down from a reading of 52 in September.

    What ISM said: Manufacturing is slowing down and could soon enter contraction territory, but that doesn’t mean there will be a recession in the U.S., said Timothy Fiore, chair of the ISM factory business survey.

    “I don’t see a collapse of new orders. I don’t see a collapse of the PMI,” Fiore said.

    Looking ahead: “Recession jitters among manufacturers won’t disappear any time soon…manufacturing will endure more pain as demand weakens at home and abroad while prices stay high and interest rates remain fairly elevated,” said Oren Klachkin, economist at Oxford Economics.

    Market reaction: Stocks
    DJIA,
    -0.24%

    SPX,
    -0.41%
    were lower after the economic data. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    4.053%
    moved back above 4%.

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