US manufacturing sector contraction worsened in December amid a decline in new orders, while business confidence rose to a three-month high, a survey released by S&P Global (SPGI) showed Tuesday.
The S&P Global purchasing managers’ index fell to 47.9 last month from November’s 49.4 reading. The consensus was for a 48.4 print in a survey compiled by Bloomberg. The latest drop in the health of the manufacturing sector was “modest” overall and the quickest since August, according to the report.
“Output fell at the fastest rate for six months as the recent order book decline intensified,” S&P Global Market Intelligence Chief Business Economist Chris Williamson said. “Manufacturing will therefore likely have acted as a drag on the economy in the fourth quarter.”
Firms reported weakness in both domestic and external demand conditions last month amid uncertainty in global economy, while new export orders returned to contraction territory, the survey showed. Cost burdens grew at a sharper speed, while selling prices rose at the quickest rate since April.
Employment reduced for the third straight month, while the rate of job cuts was the joint-sharpest since June 2020, according to the report. “The fourth quarter has consequently seen factories reduce employment at a pace not seen since 2009, barring only the early pandemic lockdown months,” Williamson said.
Business optimism grew in December amid expectations of a pick-up in client demand and greater investment in advertising, the survey showed.
“Given current order book trends, the overall picture from the survey is one of supply exceeding demand for many goods, which points to downside risks to production, employment and prices as we head into 2024,” Williamson said.