US manufacturers have seen a steep decline in the health of the industry during the last month of 2022, according to the latest PMI data from S&P Global.
The survey attributed the slump to weak client demand, which drove the rapid contractions in output and new orders.
Furthermore, muted domestic and foreign customer demand led to a slower rise in employment.
Employment in the US manufacturing sector increased fractionally as pressure on capacity waned and backlogs of work fell sharply. Businesses also saw a decrease in purchasing activity as excess stocks built in early 2022 was used to fulfil orders.
“Concerns regarding the outlook for demand weighed on hiring decisions. Job creation was only slight, and largely linked to skilled hires, as firms displayed caution,” said Sian Jones, senior economist at S&P Global Market Intelligence.
Meanwhile, production levels at manufacturing firms contracted for the second consecutive month.
Output fell at its quickest pace within two-and-a-half years, as client demand waned and new orders fell further. The decline in new orders was overall steep and among the fastest since 2007.
Foreign client demand also contracted as dollar strength and global economic uncertainty weighed on sales made abroad.
In the report, US manufacturers have expressed concerns regarding the impact of inflation and weak demand on future output.
“Sinking demand for inputs and greater availability of materials at suppliers led to a further easing of inflationary pressures. In fact, the rate of input price inflation fell below the series trend. Selling price hikes also eased, albeit still rising steeply,” Jones said.
“Slower upticks in inflation signal the impact of Fed policy on prices, but growing uncertainty and tumbling demand suggest challenges for manufacturers will roll over into the new year,” the economist added.
