The US industrial sector is slowly declining

 The US industrial sector is slowly declining

The US industrial sector is slowly declining

In the last month of 2023, the ISM manufacturing index increased from 46.7 percent in November to 47.4 percent.

The total was marginally more than what was predicted by consensus.

According to survey data issued on Wednesday, manufacturing activity in the US shrank in December for the fourteenth consecutive month.

In the last month of 2023, the Institute for Supply Management's (ISM) manufacturing index increased from 46.7 percent in November to 47.4 percent.

The number was still below the 50-point threshold that divides growth from contraction, but being somewhat higher than consensus projections.

Timothy Fiore, the president of the ISM survey, said in a statement that "the US manufacturing sector continued to fall, but at a slightly slower rate in December."

"None of the six leading manufacturing industries recorded growth in December," he said.

Demand has also decreased, according to Fiore, who also observed that the new export orders index is "essentially flat" and the new orders index is shrinking more quickly.

Economists from Pantheon Macroeconomics said that the manufacturing sector's general weakness was "largely due to limited capital expenditure".

However, the decline in interest rates this year ought to lift spirits.

According to an ISM responder in the computer and electronic goods industry, "more companies will be encouraged to spend on capital investment again as they anticipate that the US Federal Reserve will hold off on interest rate changes."

"As the budget receives authorization after the beginning of the calendar year, it will help boost investment as well as boost manufacturing activity once again," the responder said.

Since the start of 2022, the Fed has significantly increased its benchmark lending rate, raising the cost of borrowing in an effort to reduce demand and slow the rise in inflation.

Although there is rising confidence that a rate decrease is imminent, the central bank has maintained stable interest rates in previous policy sessions.

The interest-sensitive housing industry and manufacturing are expected to gradually revive, according to Pantheon economists.

The acceleration of GDP growth, he cautioned, would probably result from "a modest increase in real consumption expenditure, where a reduction effect of the prior rate hike has nevertheless not fully worked itself out.”