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Institute for Supply Management
Jan 03, 2025, 10:00 ET

New Orders Growing and Backlogs Contracting; Production Growing and Employment Contracting; Supplier Deliveries Slowing; Raw Materials Inventories Contracting; Customers’ Inventories Too Low; Prices Increasing; Exports Unchanged and Imports Contracting

TEMPE, Ariz., Jan. 3, 2025 /PRNewswire/ — Economic activity in the manufacturing sector contracted in December for the ninth consecutive month and the 25th time in the last 26 months, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 49.3 percent in December, 0.9 percentage point higher compared to the 48.4 percent recorded in November. The overall economy continued in expansion for the 56th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index continued in expansion territory for the second month after seven months of contraction, strengthening to 52.5 percent, 2.1 percentage points higher than the 50.4 percent recorded in November. The December reading of the Production Index (50.3 percent) is 3.5 percentage points higher than November’s figure of 46.8 percent. The index returned to expansion after six months in contraction. The Prices Index continued in expansion (or ‘increasing’) territory, registering 52.5 percent, up 2.2 percentage points compared to the reading of 50.3 percent in November. The Backlog of Orders Index registered 45.9 percent, up 4.1 percentage points compared to the 41.8 percent recorded in November. The Employment Index registered 45.3 percent, down 2.8 percentage points from November’s figure of 48.1 percent.

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“The Supplier Deliveries Index indicated marginally slower deliveries, registering 50.1 percent, 1.4 percentage points higher than the 48.7 percent recorded in November. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 48.4 percent, up 0.3 percentage point compared to November’s reading of 48.1 percent.

“The New Export Orders Index’s ‘unchanged’ reading of 50 percent is 1.3 percentage points higher than the 48.7 percent registered in November. The Imports Index remained in contraction territory in December, registering 49.7 percent, 2.1 percentage points higher than November’s reading of 47.6 percent.”

Fiore continues, “U.S. manufacturing activity contracted again in December, but at a slower rate compared to November. Demand showed signs of improving, while output stabilized and inputs stayed accommodative. Demand analysis includes: the (1) New Orders Index remaining in expansion territory, (2) New Export Orders Index increasing (up 1.3 percentage points and now ‘unchanged’), (3) Backlog of Orders Index slowing its rate of decline but continuing in contraction territory, and (4) Customers’ Inventories Index dropping into ‘too low’ territory. Output (measured by the Production and Employment indexes) was positive; factory output stabilized compared to November, indicating that panelists’ companies are executing to plan. Employment contracted as final head-count adjustments were likely taken to prepare for 2025. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories and imports improving marginally (though remaining in contraction), prices increasing and supplier deliveries marginally slowing.

“Demand improved, production execution met November’s performance (and companies’ plans), de-staffing continued (but should end soon), and price growth was marginal. Fifty-two percent of manufacturing gross domestic product (GDP) contracted in December, down from 66 percent in November. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 49 percent in December, a 1-percentage point increase compared to the 48 percent reported in November. None of the six largest manufacturing industries expanded in December, down from two in November,” says Fiore.

The seven manufacturing industries reporting growth in December — listed in order — are: Primary Metals; Electrical Equipment, Appliances & Components; Wood Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; and Plastics & Rubber Products. The seven industries reporting contraction in December — in the following order — are: Textile Mills; Fabricated Metal Products; Printing & Related Support Activities; Machinery; Chemical Products; Transportation Equipment; and Nonmetallic Mineral Products.

WHAT RESPONDENTS ARE SAYING

  • “Slightly lower due to seasonality and end-of-year destocking.” [Chemical Products]
  • “Automotive and powersport volume decreases.” [Transportation Equipment]
  • “We are seeing a softening in sales. This is concerning as it’s our peak season.” [Food, Beverage & Tobacco Products]
  • “We are constrained by technical labor, despite higher-than-normal backlog.” [Computer & Electronic Products]
  • “Significant slowdown in production requirements in the last two months of the year.” [Machinery]
  • “Order levels well below forecast projections.” [Fabricated Metal Products]
  • “The increase in new orders has our plant at full capacity.” [Electrical Equipment, Appliances & Components]
  • “Combo of seasonal factors plus increased demand outlook for 2025.” [Miscellaneous Manufacturing]
  • “There is definitely an uptick this month, though not a stable one.” [Primary Metals]
  • “The orders have increased slightly due to seasonal restocking.” [Plastics & Rubber Products]

MANUFACTURING AT A GLANCE

December 2024

Index

Series

Index

Dec

Series

Index

Nov

Percentage

Point

Change

Direction

Rate of

Change

Trend*

(Months)

Manufacturing PMI®

49.3

48.4

+0.9

Contracting

Slower

9

New Orders

52.5

50.4

+2.1

Growing

Faster

2

Production

50.3

46.8

+3.5

Growing

From

Contracting

1

Employment

45.3

48.1

-2.8

Contracting

Faster

7

Supplier Deliveries

50.1

48.7

+1.4

Slowing

From Faster

1

Inventories

48.4

48.1

+0.3

Contracting

Slower

4

Customers’ Inventories

46.7

48.4

-1.7

Too Low

Faster

3

Prices

52.5

50.3

+2.2

Increasing

Faster

3

Backlog of Orders

45.9

41.8

+4.1

Contracting

Slower

27

New Export Orders

50.0

48.7

+1.3

Unchanged

From

Contracting

1

Imports

49.7

47.6

+2.1

Contracting

Slower

7

OVERALL ECONOMY

Growing

Faster

56

Manufacturing Sector

Contracting

Slower

9

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

*Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY

Commodities Up in Price

Aluminum (13); Caustic Soda (2); Copper (3); Electronic Components; Labor — Temporary; Methanol; Natural Gas (3); Packaging Materials; Steel — General*; Steel — High Carbon; and Steel-Making Elements*.

Commodities Down in Price

Diesel Fuel (2); Plastic Resin (2); Polypropylene Resin; Solvents (2); Steel — General*; Steel — Hot Rolled (2); Steel — Scrap; and Steel-Making Elements*.

Commodities in Short Supply

Electrical Components (51); Electronic Components (9); and Labor — Construction Services and Skilled.

Note: The number of consecutive months the commodity is listed is indicated after each item.

*Indicates both up and down in price.

DECEMBER 2024 MANUFACTURING INDEX SUMMARIES

Manufacturing PMI®

The U.S. manufacturing sector contracted for the ninth consecutive month in December, as the Manufacturing PMI® registered 49.3 percent, 0.9 percentage point higher compared to the 48.4 percent reported in November. “After breaking a 16-month streak of contraction by expanding in March, the manufacturing sector has contracted for the last nine months. Of the five subindexes that directly factor into the Manufacturing PMI®, three (New Orders, Production and Supplier Deliveries) were in expansion territory, compared to only one in November. The Employment Index remained in contraction, but the New Orders Index moved further into expansion in December. Of the six biggest manufacturing industries, none registered growth,” says Fiore. A reading above 50 percent indicates that the manufacturing sector is generally expanding; below 50 percent indicates that it is generally contracting.

A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the December Manufacturing PMI® indicates the overall economy grew for the 56th straight month after last contracting in April 2020. “The past relationship between the Manufacturing PMI® and the overall economy indicates that the December reading (49.3 percent) corresponds to a change of plus-1.9 percent in real gross domestic product (GDP) on an annualized basis,” says Fiore.

Read full release: ISM 

RELATED CONTENT:

Manufacturing PMI® at 48.4%; November 2024 Manufacturing ISM® Report On Business®

Manufacturing PMI® at 46.5%; October 2024 Manufacturing ISM® Report On Business®

 

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