Column-Global manufacturers struggle to regain momentum: Kemp

investing.com:

By John Kemp

LONDON (Reuters) — U.S. manufacturers are still struggling to emerge from the prolonged slump that began in the middle of 2022 as the pandemic-driven surge in merchandise buying subsided and consumers reverted to spending on services.

Merchandise inventories have begun to normalise but companies making expensive business equipment and consumer durables are being hit by the high borrowing costs resulting from the biggest increases to interest rates for four decades.

U.S. manufacturers reported a decline in business activity for a 14th month in a row in December, the longest business cycle slowdown since the recessions in 2001 and early Nineties.

The Institute for Supply Management's (ISM) purchasing managers index increased marginally to 47.4 (17th percentile for all months since 1980) from 46.7 (14th percentile) in October.

But the index has been below the 50-point threshold that divides expansion from contraction since November 2022.

The number of months below the threshold has had more in common with a cycle-ending recession (generally 11 months or more) than a mid-cycle slowdown (typically 10 months or fewer).

Chartbook: U.S. manufacturing activity

The slowdown appears to be prolonged but unusually shallow. Manufacturing output has been essentially flat for about a year, according to separate data compiled by the Federal Reserve.

Flat-lining manufacturing is confirmed by data on sales of diesel and other distillate fuel oils used by manufacturers and freight hauliers, which have also been flat or marginally lower for a year.

Distillate fuel oil consumption was level or slightly lower throughout the first 10 months of 2023 whether biofuels are included or not.

However, in a sign the trough has passed and