Ism Manufacturing Index Shows Recovery Signs

 Ism Manufacturing Index Shows Recovery Signs

Ism Manufacturing Index Shows Recovery Signs In December

Contraction in the US manufacturing sector continues even in the last month of 2023. However, the one positive thing to note is that the speed of decline has slowed down due to improved factory employment and an increase in production.

According to the ISM survey, the PMI reading touched 47.4 points in December 2023. In the previous two months, the reading remained stuck near 46.7, which suggests that December brought a positive change.

Ism Shows 14 Months Of Contraction

Despite the recent improvement, the manufacturing sector of the USA remains in the contraction phase. It's almost one year and two months since the industry has declined. The long duration makes it one of the most extended contraction phases, only last seen from 2000 to 2002.

Forecasts from 3rd party analysts showed a reading of 47.1, but the actual reading came with a +0.3 change. Although that's a positive change, some experts believe the ISM survey must accurately assess the manufacturing sector's weakness.

Even today, the manufacturing sector still represents around 10.03% of the US economy. So, any contraction in this sector also directly correlates to a slowdown in the US economy.

If we look at the output numbers, they are still weak despite the positive development. However, the speed of decline has gone down over the recent months.

The US economy is still strong and showed a 4.9% growth during the Q3 (annually). For the last quarter, the GDP estimates are near 2%, which is a good number.

Factory production has also improved as it reached a reading of 50.3 from an earlier reading of 48.5. Looking forward, a fall in the inventory levels will further enhance the production of the US factories.

decrease in demand has also translated into lower product prices, suggesting that deflation is still going on!

When we compare the US PMI with the Chinese PMI, it becomes clear that the US central bank still has a lot of work to do!

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