(Bloomberg) -- A US factory measure improved for a second month in December as orders and production picked up, suggesting the cloud over manufacturing may be starting to lift.
The Institute for Supply Management’s manufacturing gauge rose almost a point to 49.3, the highest level since March, according to data released Friday. While still below 50 and indicating activity continues to shrink, the index was firmer than all but one estimate in a Bloomberg survey of economists.
The group’s measure of new orders rose more than 2 points to 52.5, the strongest reading since the start of last year and matching the highest since May 2022. The pickup in demand helped generate the first month of expanding production since May, based on the output gauge.
At the same time, the survey revealed more producers reduced staffing levels at a faster rate. The employment index fell almost 3 points, the most since July, to 45.3 in December. The rest of the five measures that make up the overall purchasing managers gauge all improved.
“Demand improved, production execution met November’s performance (and companies’ plans), de-staffing continued (but should end soon), and price growth was marginal,” Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
Seven industries reported contraction in December, led by textiles, fabricated metals and printing. Seven sectors expanded, including primary metals, electrical equipment and appliances.
While the survey overall indicates less pessimism among factory managers in the aftermath of Donald Trump’s presidential election victory, the path forward may prove bumpy. Potential tariffs, weak overseas economies and a stronger dollar risk damping enthusiasm about a more favorable regulatory environment and pro-business fiscal policy.
Producers are also contending with elevated costs. The ISM’s gauge of prices paid rose by 2.2 points to 52.5.
Select ISM Industry Comments
“Automotive and powersport volume decreases.” — Transportation Equipment
“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 Metals
“The increase in new orders has our plant at full capacity.” — Electrical Equipment & Appliances
“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
Meanwhile, inventory levels at manufacturers and their customers continued to contract. The ISM measure of customer stockpiles shrank at the fastest pace since July, suggesting there’s room for orders to remain firm in coming months.
(Adds graphic, select ISM industry comments)
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