By Joshua Kirby


Activity among U.S. manufacturers continued to contract in December, albeit at a slower pace, as new orders fell back, according to a sector index.

The Institute for Supply Management said Wednesday that its index of manufacturing activity rose to 47.4 from 46.7 in November.

Economists polled by The Wall Street Journal had forecast the index to rise a little less steeply to 47.2. A reading above 48.7 over a period of time in the ISM index generally indicates expansion in the U.S. economy.

The reading marks a 14th straight month of decline, reversing some of the gains made in the previous period of growth lasting more than two years, according to the ISM index.

"The U.S. manufacturing sector continued to contract, but at a slightly slower rate in December as compared to November. Companies are still managing outputs appropriately as order softness continues," said Timothy Fiore, chairman of the ISM Manufacturing Business Survey Committee.

The index of new orders sank to 47.1 in December from 48.3 in November, though production improved a little, rising to 50.3 from 48.5 previously. The employment index also increased, coming in at 48.1 from 45.8 previously.

"Demand remains soft, and production execution is stable compared to November, as panelists' companies continue to manage outputs, material inputs and labor costs," Fiore said.

None of the six biggest manufacturing industries booked growth in December, with three--machinery, petroleum and coal, and computer and electronic products--booking an index reading below 45. The only industry to report growth was primary metals, while those booking the sharpest contractions included apparel, plastics and rubber products, machinery, paper, and wood.

Business is slowing and inventories are growing, noted one respondent from the machinery sector.

Some companies may be holding off on capital investment pending an expected cut to interest rates by the Federal Reserve, said another respondent, active in the computers and electronics sector.

"As budgets get approval after the start of the calendar year, this should help drive investment and increase manufacturing activity once again," the respondent said.


Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby


(END) Dow Jones Newswires

01-03-24 1041ET