Advertisement
Advertisement

ISM Manufacturing PMI Report Highlights Contraction In Factory Activity

By:
Vladimir Zernov
Updated: Jan 4, 2023, 15:34 UTC

Manufacturing PMI fell to its lowest level since the coronavirus pandemic recovery began.

S&P 500

In this article:

Key Insights

  • ISM Manufacturing PMI declined from 49 in November to 48.4 in December. 
  • The report highlighted the current weakness in factory activity. 
  • Riskier assets pulled back after the report as traders focused on recession risks. 

ISM Manufacturing PMI Missed Analyst Expectations

On January 4, U.S. reported that ISM Manufacturing PMI declined from 49 in November to 48.4 in December, compared to analyst consensus of 48.5. ISM Manufacturing New Orders declined from 47.2 to 45.2. Numbers below 50 show contraction.

The Institute for Supply Management commented: “The U.S. manufacturing sector again contracted, with the Manufacturing PMI at its lowest level since the coronavirus pandemic recovery began. With Business Survey Committee panelists reporting softening new order rates over the previous seven months, the December composite index reading reflects companies’ slowing their output.”

The report confirmed the slowdown of the economy. Traders are trying to predict whether economic weakness will force the Fed to be less hawkish. At this point, it looks that the Fed will not change its mind in the near term.

S&P 500 Declines After PMI Data

S&P 500 gained downside momentum and moved to session lows after the release of the ISM reports. Traders do not believe that the Fed would be less hawkish at the next meeting and focus on recession risks.

The report has also provided support to the U.S. dollar, which benefited from its status of a safe-haven asset. The U.S. Dollar Index moved from 104 to 104.35.

Treasury yields have moved higher, and the yield of 10-year Treasuries settled back above the 3.70% level.

Meanwhile, gold pulled back towards the $1850 level as traders focused on stronger dollar. It remains to be seen whether the current pullback will be strong as gold gets support from rising demand for safe-haven assets.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

Did you find this article useful?

Advertisement