US manufacturing contracts for second consecutive month

Chris Papadopoullos
Follow Chris
Factories in the US ended 2015 in a state of decline (Source: Getty)

The US manufacturing sector contracted for a second consecutive month in December, according to survey figures released today.

The Institute for Supply Managemtent's purchasing managers' index (PMI) dropped to a score of 48.2 per cent from 48.6 per cent the previous month. Figures below 50 imply a decline in business activity on the month. It takes the growth of the manufacturing sector – as implied by the PMI – to its slowest since 2009.

Manufacturing firms said they had slowed their hiring, with the employment index falling into contraction territory. It suggests firms are laying off workers faster than they are hiring them.

New orders and production declined, while exports rose on the month.

US manufacturers have been hindered by a number of factors such as weak growth abroad, a strong dollar which makes their goods more expensive in export markets, and a fall in the price of oil, which has reduced demand for machinery used by oil firms, having knock-on effects along the supply chain.

Economist Ian Shepherdson from Pantheon Macroeconomics said the decline in manufacturing was unlikely to last much longer. However, he added:

The core story in manufacturing hasn't changed with the New Year; the sector remains under pressure from the strong dollar and the collapse in oil firms' capex. But the factors hurting manufacturers make consumers better off, and manufacturing accounts for only 12 per cent of GDP; consumption is 69 per cent.

Related articles