ISM Manufacturing Signals Softer Conditions

The most recent Institute For Supply Management (ISM) manufacturing report points to even softer conditions for a sector that showed very little life during 2015, although it was held down by energy and weak foreign demand. The ISM manufacturing survey shows the weakest conditions since July 2009.

The number for December came in at 48.2, much lower than Bloomberg and Econoday’s 49.2 consensus estimate. The reading for the month of November was 48.6. This is only the third reading of less than 50 of the recovery.

The story behind this is very similar to that of November, which came in showing a slight contraction was underway for both new orders and production.

Employment in the current reading is noticeably weaker than November, at 48.1 for over a two-point decline, and the second sub-50 reading in the past three months. However, there was a sizable 4.5 point rise for new export orders to 51.0, which was a positive for the report.
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Inventories are steady and low, but the reading still says inventories are a little bit high, which undermines caution in their outlook. Prices for raw materials continue to contract, a reminder that low oil and commodity prices are making it difficult for the Federal Reserve to reach its 2% inflation target.