Inflation Concerns Resurface as Input Costs and Prices Rise
In December, U.S. manufacturing remained in contraction, with output decreasing at the fastest pace in 18 months. The S&P Global U.S. Manufacturing PMI fell to 49.4 in December from 49.7 in November, slightly below the 50 threshold that indicates a contraction in the sector. This suggests manufacturing conditions deteriorated to a greater extent than the previous month but still only at a modest rate overall.
After nearly stabilizing in November, the rate of decline in new orders increased sharply in December, with customers reluctant to commit to new projects. Production levels falling for a fifth consecutive month at an increased rate generally reflected the drop in new orders. New export orders also declined and to a greater extent than overall new business, as Europe and Australia reported weaker demand.
In addition, business confidence pared back some in December after jumping in November. Nonetheless, employment continued to rise modestly as firms anticipate the incoming administration will improve demand conditions, providing a boost to business in 2025.
Although respondents felt more optimistic due to the election result, firms expressed increased worries about inflation as input costs increased sharply. As a result, manufacturers were prompted to increase their output prices again. Meanwhile, suppliers’ delivery times lengthened to the greatest extent since October 2022, linked to staff shortages at suppliers and freight delays.