The United States manufacturing sector ended 2024 on a weak note, with output and new orders falling at accelerated rates.
The S&P Global U.S. Manufacturing Purchasing Managers’ Index dropped to 49.4 in December, down from 49.7 in the previous month. Although the reading was an improvement from the preliminary 'flash' estimate of 48.3, it marked the sixth consecutive month of contraction in the sector.
December saw the sharpest decline in production in 18 months, driven by a faster reduction in new orders. Domestic and export demand weakened, with Europe and Australia among the markets reporting reduced demand.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence noted: “Production was cut at an increased rate in December amid disappointing inflows of new orders. While November had seen a near-stabilisation of order books as uncertainty surrounding the election passed, reviving customer demand, this respite has proved temporary. Factories are reporting an environment of subdued sales and inquiries, notably in terms of exports.”
Hesitancy among customers, partly linked to the impending change in the U.S. administration, further dampened new business.
Manufacturers faced rising input costs, with inflation accelerating to its fastest pace since August. Higher supplier charges and raw material costs pushed firms to increase their selling prices, marking a three-month high in output price inflation.
Despite the downturn, employment in the sector rose modestly for the second consecutive month. Increased workforce numbers, however, coincided with falling orders, leading firms to deplete backlogs of work at the steepest rate since June 2023. Purchasing activity and inventories of both inputs and finished goods were reduced, reflecting cautious inventory management.
Business confidence also weakened in December, retreating to its lowest level since August. However, optimism for a recovery in 2025 remains, with survey respondents expecting demand conditions to improve under the new administration.
Supplier performance deteriorated, with delivery times lengthening significantly due to labour shortages and freight delays. Input buying and stock levels declined at faster rates than in November, as firms adjusted to lower demand.
Williamson also noted that “Many firms are generally anticipating that business will pick up in the New Year, with respondents pinning hopes on expectations that the new administration will loosen regulations, reduce tax burdens and boost demand for U.S.-made goods via tariffs”.