U.S. manufacturing shrinks for 2nd month amid global slowdown

The employment gauge, meanwhile, dropped 3.2 points to 48.1% in December.

Contraction in new orders, employment and raw materials inventories accounted for the overall softness in December, said the ISM.

The ISM Manufacturing Index fell to 48.2 points in December – down 0.4 points from November’s reading.

While the U.S. ISM’s gauge of new orders improved to 49.2 last month from 48.9 in November, it still showed bookings were falling. It reported this could lead some economists to lower their fourth-quarter gross domestic product estimates.

A Milwaukee-area report last week showed the southeastern Wisconsin manufacturing sector continued to contract for a ninth straight month, although that report is not part of the national index. “After all, the Fed based liftoff – and will continue to base subsequent rate hikes – on expectations rather than current conditions, which leaves the potential for a significant disconnect between what the US economy can withstand and what the Fed intends to deliver”.

Export orders increased 3.5 points to 51.0, following six consecutive months of declines.

Despite a pick-up in the export sub-index, the US manufacturing sector continues to face headwinds stemming from soft global economic activity, with disappointing manufacturing data out of China released last night corroborating this notion.

Manufacturing in the U.S. is in a bad place.

Factories globally ended the year on a weak note, contributing to a selloff in stocks worldwide on Monday.

Eleven of the eighteen manufacturing industries reported contraction in December: Wood Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Machinery; and Food, Beverage & Tobacco Products.

– “Low oil prices are negatively impacting oil and gas exploration activities”.

Markit’s purchasing managers’ index (PMI) fell to 51.2 from 52.8 in November, the lowest since October 2012. Residential outlays were up 0.2%. Also construction spending, a separate report, missed with a drop of 0.4% instead of +0.6% predicted.

A PMI(R) above 43.1 percent, over a period of time, generally indicates an expansion of the overall economy.