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%.
