Source: Economics Group of Wells Fargo Bank, N.A.
Summary
December marked the 14th month of contraction for ISM manufacturing, at least it was a slightly milder pace of contraction. Production is back above 50 and November’s jump in prices proved to be the anomaly we suspected it would be. Labor prospects remain dim.Production Sees Daylight as Prices Cool
In public remarks about the economy this morning, Richmond Fed President Thomas Barkin described how a “soft landing is increasingly conceivable but in no way inevitable.” Today’s release of the December ISM manufacturing index highlights the need for that “no way inevitable” qualifier. Manufacturing is contracting, albeit at a slightly slower pace with the headline index coming in at 47.4 for the last month of 2023 (chart). This bellwether for manufacturing has now been below the breakeven 50 for 14 consecutive months.
A key outlier move among sub-components was the 4.7 point drop in the prices paid measure to 45.2 from 49.9 in November (chart). Faithful readers may recall that we highlighted this as a head-fake in our report last month in the way we described the jump at the time saying “To us, this bounce can thus be somewhat classified as monthly noise, though the descent in goods prices due to a flattening in activity may be starting to find somewhat of a floor.”