Manufacturing is slowing. The ISM index remained in contraction for the second consecutive month with new orders and current production lower. But it’s not all bad news. Price pressure is abating, and while the labor market is slowing, it’s doing so only gradually.
The ISM manufacturing index slipped further into contraction territory in December dipping to 48.4, the lowest number for this factory bellwether since the early days of the pandemic in May 2020 (chart). New orders and production were both lower and both were also in contraction territory (chart). Both imports and exports fell deeper into contraction amid abounding signs of slowing global growth. These numbers are consistent with our recession call and confirm that manufacturing has pivoted from merely losing momentum to seeing outright declines in output; December marks the first outright contraction in production since 2020.