The S&P Global US Manufacturing PMI fell to 48.3 in December 2024 from 49.7 in the previous month, well below market expectations of a slight improvement to 48.9, according to a flash estimate. This result extends the contractionary trend for US factory activity into its sixth month, contrasting with the more resilient performance of the services sector. The decline highlights ongoing challenges within the manufacturing sector amidst broader economic uncertainties.

Sharp Contraction in New Orders and Output

December saw another month of contraction in new orders for US manufacturers, driving output to its lowest point since August 2009, excluding the pandemic-induced disruptions of the second quarter of 2020. This sharp drop reflects weakening demand both domestically and internationally, exacerbated by a slowdown in key export markets. Manufacturers continue to face difficulties securing new business amid a subdued economic environment.

Employment and Cost Pressures

Despite ongoing staff shortages, employment growth in the manufacturing sector slowed in December, marking a more moderate increase compared to previous months. These labor shortages have been a significant factor in extending lead times for production, highlighting challenges in efficiently managing supply chains. On the cost front, higher prices for raw materials continued to pressure manufacturers, contributing to sector-wide inflation.

Concerns Over Demand and Tariff Threats

Looking ahead, manufacturers are particularly concerned about the persistent lack of demand and escalating input costs. The ongoing threat of tariffs, reminiscent of measures under the Trump administration, looms large, further clouding the sector’s outlook. Manufacturers expressed a cautious outlook, indicating that without a significant shift in economic conditions or policy changes, the contractionary trend in the sector may persist into 2025.