The US Purchasing Managers Index for December was released last week by the Institute for Supply Management, and it indicated deepening slump for US manufacturing.
Supply Chain Digest Says...
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| A manager in the general manufacturing sector industry noted that “Overall, supply chain conditions have stabilized tremendously since the fourth quarter of 2021. Issues remain, but the list is quite a bit shorter." |
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With a score of 48.4, it means US manufacturing has fallen below the key 50 mark that separates expansion from contraction for the second consecutive month, after scoring 49.0 in November.
That November level was also the first time since May 2020 that the index was below the 50 mark, ending 29 months of expansion. (See chart of the PMI scores for the last 12 months below; the average score over that period was a decent 53.5, but has been trending down in the last several months of 2022).
Perhaps more worrisome, the New Orders Index remained in contraction territory at 45.2, two percentage points lower than the 47.2 recorded in November, in a negative sign for future US manufacturing activity.
Other measures in the November report were also weak. For example, the Production Index reading of 48.5 is a 3-percentage point decrease compared to November’s figure of 51.5, and moves it into contraction territory.
The Prices Index registered just 39.4, down 3.6 percentage points compared to the November figure of 43.0; this is the index’s lowest reading since April 2020 (35.3).
The index, which tracks whether costs of materials, components and other inputs are rising or falling, was just a few months ago above 80, as inflation took off.
The Backlog of Orders Index registered just 41.4, 1.4 percentage points higher than the November reading of 40.0 but still indicating strong contraction.
US PMI Last 12 Months
Source: ISM
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Just two of the US 18 industry sectors tracked by the PMI reported growth in December: Primary Metals; and Petroleum & Coal Products.
As always, there were some interesting comments from PMI survey respondents. For example, one manager in the transportaton equpment sector noted that “Orders are really slowing down in the original equipment sector. We haven’t seen a major output decrease because we are still eating away at our back orders.”
Another manager in the food and beverager sector said “Lead times are returning to normal for most of our suppliers, while some of our smaller suppliers are struggling to remain staffed up enough to keep up with orders.”
Finally, a manager in the general manufacturing sector industry noted that “Overall, supply chain conditions have stabilized tremendously since the fourth quarter of 2021. Issues remain, but the list is quite a bit shorter."
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