US manufacturing activity declined for the tenth consecutive month in December, but details of the report suggest output could remain strong in the coming months.
The Institute for Supply Management’s manufacturing index fell to 49.3 from 48.4 in November, remaining below the 50 threshold that separates expansion from contraction. The decline was mainly due to producers drawing down their crude stockpiles at the fastest pace since July 2023.
But customer inventories – stocks held by manufacturers’ customers – shrank at the fastest rate since October 2022. When customer inventory declines rapidly, it usually indicates that new orders and increased production will be needed to replenish those low stocks.
Production rose for the second consecutive month, rising at a slightly faster pace than in November. Employment declined for the eleventh consecutive month, but the pace of job losses slowed.
New orders declined for the fourth consecutive month, although export orders saw a slight recovery from the pace of November’s decline.
The price-paid index remained steady at 58.5, indicating that producers are facing increased input costs. This measure is 6 points higher than at the end of 2023.
Supplier deliveries slowed and the order backlog dwindled. Import figures fell to a seven-month low.
ISM survey respondents cited uncertainty about trade policy and tariffs as ongoing concerns, although many expressed optimism that clearer policy direction and potential fiscal stimulus could boost capital spending later this year.
