PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

ISM Survey: Manufacturing Suffers in December

By at 3 January, 2020, 5:44 am

by Raymond J. Keating-

As I have noted previously, manufacturing hit a recession in 2019, and based on the latest ISM manufacturing survey, that recession continued into December. This is a small business story given that 74.7 percent of manufacturers have fewer than 20 employees and 93.5 percent fewer than 100 workers.

The Institute for Supply Management reported that economic activity in manufacturing contracted in December. Specifically, according to Timothy R. Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee: “The December PMI registered 47.2 percent, a decrease of 0.9 percentage point from the November reading of 48.1 percent. This is the PMI’s lowest reading since June 2009, when it registered 46.3 percent.” That’s deeply troubling considering that June 2009, of course, marked the last month of the Great Recession.

The PMI – “based on data compiled from purchasing and supply executives nationwide” – recorded the fifth consecutive month of decline and “nine straight months of softening or contraction in manufacturing,” according to ISM.

Also, Fiore noted that given the past relationship, a PMI of 47.2 percent in December corresponds to a real GDP growth rate of a mere 1.3 percent.

A key challenge? Trade policy. Fiore declared, “Global trade remains the most significant cross-industry issue, but there are signs that several industry sectors will improve as a result of the phase-one trade agreement between the U.S. and China.” Indeed, U.S. overall economic growth would receive a serious boost if policymakers got back to advancing free trade in a serious, clear way.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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