Dive Brief:
- U.S. manufacturing is starting to show signs of slowing amid the current U.S. trade war with China, according to industry respondents featured in the Institute for Supply Management's (ISM) December manufacturing report released Thursday.
- ISM's main manufacturing index dropped from 59.3% in November to 54.1% in December — its lowest level since November 2016.
- "The manufacturing community continues to expand, but at much lower levels and at a sharp decline from November," said Timothy R. Fiore, ISM's Manufacturing Business Survey Committee chair.
Dive Insight:
"Growth appears to have stopped. Resources still focused on re-sourcing for U.S. tariff mitigation out of China," said one unnamed respondent in the computer and electronics field. Other respondents reported a sense of slowing — business is still strong, but the crest of the hill is behind them.
The numbers are supportive of this chilling feeling. New orders are growing at their slowest rate in three years. Imports are growing slower than they have in 23 months. Commitment lead time for capital expenditures was down to 142 days in December from 150 in November — the lowest level in at least four months — suggesting that companies are a little more hesitant to spend in the current climate.
The Associated Press reported that economists were unpleasantly surprised at ISM's figures.
Still, respondents mentioned that some sectors of the economy are continuing to burn hot while others cool — aerospace, for example, shows no sign of slowing.
Fiore did add that inventories, which have continued to decline slightly in recent months, are currently "too low," which "reflect the only positive sentiment to future production growth." Since backlogs in production did not grow in December generally, Fiore suggests demand, stemming from these low inventories levels, will continue despite the worsening climate.
Consumption is strong, he said, but the growth in production and manufacturing employment is slowing, indicating that either the uncertainty of current trade policy is taking its toll, or the possible coming economic slowdown will soon be more a certainty than a subject for debate.
