December’s Purchasing Managers’ Index showed resilient output growth with increased inflation but reduced supply shortages, according to IHS Markit. NAM Chief Economist Chad Moutray broke it down for us.
The topline numbers: “IHS Markit Flash U.S. Manufacturing PMI slowed for the fifth straight month, down from 58.3 in November to 57.8 in December, a 12-month low,” said Moutray. “Manufacturers in the U.S. continued to cite supply chain bottlenecks and workforce shortages as significant challenges to growth, and the data reflect those challenges. Growth in new orders (down from 56.9 to 56.3) expanded at the slowest pace since October 2020. At the same time, output (up from 53.2 to 53.6), future output (up from 73.7 to 75.8), exports (up from 51.0 to 51.3) and employment (up from 52.0 to 53.9) improved in preliminary December data. Survey respondents continued to signal optimism in the outlook for the next six months despite ongoing concerns.”
Deliveries stay slow, prices stay high: “Supplier delivery times (up from 18.9 to 23.2) remained near historic levels despite narrowing for the third consecutive month in December,” said Moutray. “After hitting the fastest rate in the survey’s history, input prices (down from 87.6 to 81.8) decelerated somewhat in December but remained very elevated. Similarly, output prices (down from 73.6 to 69.5) eased from a record pace for the second straight month despite rising sharply.”
On the continent: “Meanwhile, the IHS Markit Flash Eurozone Manufacturing PMI edged down from 58.4 in November to 58.0 in December, the slowest expansion of activity since February,” said Moutray. “In Germany, manufacturing sentiment edged higher in December, but activity softened in both France and, outside the Eurozone, in the United Kingdom. These three countries continued to grapple with supply chain and inflationary issues, with input costs hovering near record levels despite decelerating somewhat in December. Tighter pandemic restrictions are also a factor, especially in the services sector.”