The manufacturing sector continued to contract in December, a closely watched economic barometer from the Institute for Supply Management indicated on Wednesday.
The ISM purchasing managers’ index, or PMI, rose to 47.4 percent in December, slightly higher than the 47.2 percent analysts had forecast. In the prior month, the PMI came in at 46.7.
Despite the better-than-expected improvement, the figure remains below the 50 percent threshold dividing expansion and contraction for the sector. Levels above 48.7 tend to indicate expansions for the overall economy.
New orders fell 1.2 percent in December. Customer inventories fell to back to negative territory, although this can be seen as a promising development for future demand.
New orders fell 1.2 percentage points to 47.1. The prices paid gauge fell to a level slightly below its three month average. Prices rose 4.1 percent in 2023, according to ISM’s Timothy Fiore, and are expected to rise 3.1 percent this year.
Of the 17 industry sectors tracked by ISM, only primary metals expanded in December.
The survey reflects responses before the Fed’s December meeting and the dramatic shift in expectations for earlier and more frequent interest rate cuts next year.
“Anticipation of the U.S. Federal Reserve holding off on interest-rate changes will encourage more companies to spend on capital investments again. As budgets get approval after the start of the calendar year, this should help drive investment and increase manufacturing activity once again,” a respondent in computer and electronic products said.