Input Stories

The S&P Global Manufacturing PMI was 51.8 in December, down from the November reading of 52.2. New orders declined for the first time in a year. At the same time, exports fell for the seventh consecutive month, as tariffs continued to impact sales to key markets, especially Canada. Meanwhile, input and output prices rose in December, but at the slowest rate in 11 months. Despite the slowing pace of price increases, inflation remains elevated from a historical context in December.

Production rose over the month, allowing stocks of finished goods to rise for the fifth consecutive month. Nonetheless, output increased at a slower rate than November’s survey record due to the contraction in new orders. Furthermore, the gap between the growth of production and the drop in orders was the greatest since the height of the global financial crisis. If demand and export sales remain weak, the continuing rise in unsold stock likely will result in a decline in output in future months. Meanwhile, delivery times lengthened in December to their longest level in seven months due to difficulties receiving inputs as a result of supplier capacity constraints.

Uncertainty around tariffs continued to weigh on business confidence, with overall business confidence easing from November to the lowest level since April. Despite the uncertainty, expectations of lower interest rates and new investment plans kept business confidence positive. Firms expanded labor capacity in anticipation of strong sales next year. As a result, employment rose solidly for a fourth consecutive month in December.