The Manufacturing PMI (Purchasing Managers’ Index) is an important economic measure from the Institute for Supply Management (ISM). It shows the health of the manufacturing sector by collecting data from purchasing managers at different manufacturing firms across the U.S. The PMI is a combined index that includes new orders, production, employment, supplier deliveries, and inventories.
The PMI has several important parts that provide insights into the manufacturing sector’s condition. These parts include new orders, which measure the number of new orders manufacturers receive, and production, which looks at the production output rate. Employment assesses changes in job levels within the sector. Supplier deliveries look at the speed of deliveries and any delays, while inventories track changes in stock levels.
Each of these parts is surveyed and weighted to calculate the overall PMI. A PMI above 50 means the manufacturing sector is growing, while a reading below 50 means it is shrinking.
December S&P Global Manufacturing PMI
In December 2024, the US manufacturing sector experienced a downturn. New orders and production declined sharply, while input costs rose significantly, leading manufacturers to increase their prices. Despite this, employment saw modest growth for the second month in a row. The manufacturing PMI fell slightly to 49.4, showing continued sector deterioration for the sixth month. New and export orders dropped due to customers’ reluctance ahead of a new administration in January.
Source: spglobal
December ISM Manufacturing PMI
The ISM Manufacturing PMI for December was 49.3, an improvement from November’s 48.4. The overall economy remained in expansion for the 56th consecutive month. Key indices showed mixed performance:
- New Orders Index: Improved to 52.5, indicating expansion.
- Production Index: Returned to expansion at 50.3.
- Prices Index: Rose to 52.5, continuing in expansion territory.
- Backlog of Orders Index: Increased to 45.9, though still in contraction.
- Employment Index: Decreased to 45.3, indicating contraction.
- Supplier Deliveries Index: Slower deliveries at 50.1.
- Inventories Index: Slightly increased to 48.4.
- New Export Orders Index: Unchanged at 50.
- Imports Index: Remained in contraction at 49.7.
U.S. manufacturing activity contracted again in December but at a slower rate. Demand showed signs of improvement, with stable output and accommodative inputs. However, employment contracted, and major manufacturing industries saw varying performance, with seven industries reporting growth and seven reporting contraction.
Source: ism
Impacts of Report on Stock Market
The actual Manufacturing PMI of 49.3 for December 2024 exceeded forecasts of 48.4. This indicates a better-than-expected performance in the manufacturing sector, which could positively impact investor sentiment and potentially lead to a boost in stock market performance, especially for sectors tied closely to manufacturing. Industries directly related to manufacturing, such as industrial goods, machinery, and raw materials, may see more pronounced movements in their stock prices based on PMI data. The S&P 500 often reacts positively to better-than-expected PMI data; it’s likely that the S&P 500 could see a boost in investor confidence and potentially an upward movement in stock prices.
