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U.S. Manufacturing Sector Showing Signs of Deceleration

Most recent IHS Markit, ISM reports reveal slower demand growth, continued trade, tariff concerns.

The new year is off to a rocky start on the economic data front with a string of manufacturing reports coming in below economists’ forecasts.

Financial data provider IHS Markit reported last week that weaker new-order growth contributed to its U.S. Manufacturing PMI (Purchasing Managers Index) falling in December to a 15-month low. The Institute for Supply Management (ISM), meanwhile, reported the following day that its manufacturing index showed that activity had grown at the slowest pace in two years amid softening demand.

The IHS Markit U.S. Manufacturing PMI fell to 53.8 in December, down from 55.3 in November. The 15-month low in the headline index reflected a weaker rise in new business and what IHS Markit said was the “joint-softest” expansion in output since September 2017. What’s more, business confidence among manufacturers fell again in December, with the degree of optimism dipping to its lowest since October 2016.

“Manufacturers reported a weakened pace of expansion at the end of 2018, and grew less upbeat about prospects for 2019,” Chris Williamson, IHS Markit’s chief business economist, said in a statement. “The month rounds of[f] a fourth quarter in which manufacturing production is indicated to have risen at only a modest annualised rate of about 1%.”1

ISM reported that its purchasing manager’s index for manufacturing fell 5.2 percentage points in December from the previous month to 54.1. Just this past August, that index was at 61.3 – its highest point since May 2004. Further data from ISM showed that its index of new orders declined by 11 percentage points in the previous month to a reading of 51.1 – the lowest since August 2016. ISM’s production index fell 6.3 percentage points to 54.3, the weakest since October 2016.2

Headline index readings above 50 indicate that manufacturing activity is expanding, yet both reports were well below what economists had forecasted. “While still at a level indicative of growth, the substantial decline, particularly in new orders and production components, is reflective of rising concerns over slowing global growth translating to weaker U.S. growth,” Citigroup Inc. economist Veronica Clark said in a note on the ISM data, published in this Bloomberg report.3

Signs that output and activity from the nation’s manufacturing sector had begun to ease became evident in recent weeks to those who had been keeping an eye on surveys released by regional banks within the Federal Reserve System. Reports for five Federal Reserve indexes of regional manufacturing activity all fell in December, the first time that’s occurred since May 2016.

The lower-than-expected index readings from IHS Markit and ISM were released as concerns remain surrounding the pace of economic growth, given the backdrop of rising corporate borrowing costs, slowing demand and the ongoing trade tensions between the U.S. and China.

“The deterioration in the survey data over the past several months has contributed to our view that recession risks have increased,” Daniel Silver, an economist at JPMorgan, said in a note published in the Bloomberg report.3

If you would like an update on what may be in store for financial markets in 2019, be sure to register for BCJ’s Live Market Update Webinar on January 10th. Here’s the link. CIO Ben Bimson will cover several topics, along with an overview about what current economic and financial data are telling us about the markets for 2019. Ben’s recent Coffee Talk post is a great primer for the upcoming webinar. It examines four Hot Topics to help understand the current market and economic environment.



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1 IHS Markit (2019, January 2). IHS Markit US Manufacturing PMI™:  PMI slips to 15-month low in December. Retrieved from:

2 Institute for Supply Management (2019, January 3). December 2018 Manufacturing ISM® Report On Business®. Retrieved from:

3 Kearns, J. and Dmitrieva, K. (2019, January 3). Factory-Gauge Plunge Fuels Concerns That U.S. Growth Is Slowing. Bloomberg. Retrieved from:


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