*** Happy, Healthy New Year ***
U.S. Manufacturing PMI:
S&P Global: Output falls at fastest pace in 18 months
The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI®) posted 49.4 in December, down from 49.7 in November but up from the ‘flash’ reading of 48.3.
Latest data showed a sixth consecutive monthly worsening in the health of the manufacturing sector. The deterioration in December was more marked than that seen in November, but still only modest overall.
Manufacturing production was down for the fifth successive month, with the rate of contraction the fastest in a year-and-a-half. Lower output generally reflected a drop in new orders.
After having neared stabilization in the previous month, new business decreased at a faster pace in December.
New export orders were also down, and to a greater extent than total new business. Europe and Australia were among the export markets reported to have seen a reduction in demand.
Where new orders decreased, this was often linked to a reluctance among customers to commit to new projects. In some cases, this reflected a pause ahead of the new administration taking power in January.
However, survey respondents generally noted that the incoming administration is expected to help boost demand conditions in the new year. Manufacturers were therefore optimistic that output will increase over the course of 2025. That said, after jumping in November, sentiment fell back in December and was the lowest since August.
Positive expectations for the coming year encouraged manufacturers to increase staffing levels for the second month running. The rate of job creation was modest and slightly slower than seen in November.
Rising workforce numbers at a time of falling new orders meant that firms continued to work through outstanding business in the final month of the year. Moreover, the pace of depletion was sharp and the steepest since June 2023.
While firms increased employment, the drop in new orders resulted in reductions in purchasing activity, as well as stocks of inputs and finished goods. Input buying and stocks of purchases both decreased more quickly than in November, while the reduction in stocks of finished goods was the first in six months.
The rate of input cost inflation accelerated sharply at the end of the year, with the latest increase the fastest since August. The rise was broadly in line with the pre-pandemic average.
Higher supplier charges and rising costs for raw materials were reported by panellists. In turn, firms increased their output prices, with the pace of inflation quickening to a three-month high. Charges have risen continuously since June 2020.
Meanwhile, suppliers’ delivery times lengthened to the greatest extent since October 2022, linked to staff shortages at suppliers and freight delays.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence
(…) Factories are reporting an environment of subdued sales and inquiries, notably in terms of exports.
“Many firms are generally anticipating that business will pick up in the New Year, with respondents pinning hopes on expectations that the new administration will loosen regulations, reduce tax burdens and boost demand for US-made goods via tariffs. Confidence has consequently risen from a low-point last June, having jumped higher in November on the election result.
However, this optimism has been pared back somewhat in December, as firms are now reporting worries over higher input prices, and are concerned that inflation may pick up again, adding to speculation that interest rates will not be cut as much as previously thought likely over the coming year.
Canada: Growth of manufacturing sector sustained in December
The seasonally adjusted S&P Global Canada Manufacturing Purchasing Managers’ Index™ (PMI®) remained above the crucial 50.0 no-change mark in December to signal growth of the sector for a fourth successive month. The PMI edged up to 52.2, from 52.0 in November, just below its long-run average of 52.4.
Supporting the PMI in December were concurrent rises in output and new orders. Growth rates were again solid, with firms noting a general uplift in demand. In some instances, panellists reported better sales to US clients in line with inventory accumulation ahead of expected tariff imposition on Canadian goods by the US in 2025.
A weaker Canadian dollar also helped to support sales. However, export demand overall remained underwhelming according to several panellists and foreign sales ended fractionally lower in December. Manufacturers remained suitably encouraged by production and new order trends to raise their purchasing activity (albeit marginally) for the first time since July 2022. (…)
Firms sought to recruit additional workers, especially skilled roles, during December. This meant that employment rose for a fourth successive month overall, though growth was marginal and the softest since September. Extra capacity helped firms to keep on top of overall workloads, with backlogs of work falling slightly over the month.
On the cost front, input price inflation accelerated during December, reaching its highest level since April 2023. Panellists commented that a range of goods had risen in cost, with vendors willing to increase their charges given stronger demand. A weaker Canadian dollar increased the cost of imported goods, according to panellists. In response, average output charges rose again. Although solid, output price inflation was down slightly on November’s three-month high.
Finally, confidence in the outlook was positive in December, with confidence overall reaching its highest level in nearly a year-and-a-half. Firms are forecasting an increase in US exports ahead of expected tariff imposition in 2025. However, the timing and scope of these tariffs meant the outlook was unusually uncertain for manufacturers at the end of 2024.
(…) Order cancellations, subdued demand conditions and uncertainty in the automotive sector reportedly hampered sales volumes. That said, the rate of contraction in total new orders was marginal and equal to that recorded in November.
The downturn in new export orders entered its tenth straight month in December, though the pace of contraction moderated from November. Where a contraction was reported, panellists remarked on weaker demand from US-based clients. (…)
Global manufacturing contracts at end of 2024
The J.P.Morgan Global Manufacturing PMI® posted 49.6 in December, down from 50.0 in November. Although the rate of deterioration signalled by the latest figure was only modest, this was the fifth decline during the past six months.
Four out of five PMI components (output, new orders, employment and stocks of purchases) were at levels consistent with a deterioration in overall operating conditions. Only a lengthening of supplier delivery times had a positive impact on the PMI.
Manufacturing production fell slightly in December. The rate of decline was only modest and, when taken together with the marginal gains seen in October and November, suggested output broadly stagnated over the final quarter as a whole. (…)
Data broken down by sector signalled lower production in the intermediate and investment goods industries. This contrasted with the performance of the consumer goods category, where output rose for the seventeenth month in a row. The same picture was signalled for new orders, with declines at intermediate and investment goods producers only partly offset by growth in the consumer goods sector.
International trade volumes fell for the seventh consecutive month in December. Only eight nations covered saw new export orders increase, namely Spain, Russia, India, Taiwan, South Korea, Indonesia, the Philippines and Greece. (…)
Input cost inflation accelerated to a four-month high in December. Selling price inflation meanwhile eased to a nine-month low.
US Car Sales Get Year-End Boost From Trump’s Threat to End EV Tax Credits
EV sales grew 12% in the fourth quarter of 2024, pushing the full-year total to a record 1.3 million, according to forecasts from researcher Cox Automotive. That’s up from an 8% growth rate in the previous quarter. Plug-in models make up around 8% of the overall US car market, only slightly more than a year ago.
The annualized rate for 2024 rose to 15.9 million cars, based on the average forecast of four researchers, up from 15.5 million a year ago. (…)
Only a quarter of new-car shoppers are considering an EV for their next purchase, down two percentage points from a year ago, according to JD Power. (…)
As for the overall new car market, lower interest rates, rising manufacturer incentives and fading anxiety around the election drew more buyers, prompting analysts to raise full-year sales forecasts. (…)
The average retail transaction price for new vehicles is trending toward $46,258, according to JD Power. (…)
FYI, a Rolex yellow gold Day-Date model with a 40-mm black dial now costs about $45,809, up nearly 8% from last year.
China Flexes Lithium Dominance With Plans for Tech-Export Curbs
China is planning tougher scrutiny on exports of technology to make battery materials, as Beijing looks to protect its grip on a crucial supply chain amid rising global trade tensions.
The government has proposed adding various technologies — some used for lithium refining and battery chemicals production — to its list of items that are subject to export controls, according to a notice seeking public opinion from the Ministry of Commerce on Thursday.
The plan appears aimed at protecting innovations that China has developed during its rise to dominate global battery and electric-vehicle production. It comes against a backdrop of burgeoning competition with the US in everything from critical minerals to semiconductors.
The proposed curbs target a selection of processes used to make battery-grade lithium chemicals, including direct lithium extraction, an emerging method in which China has considerable expertise. It also covers some specific types of chemical compounds used in making cathodes that are crucial to the performance of batteries. (…)
The new export controls would cover technology for making certain types of lithium-iron-phosphate cathode, as well as lithium-iron-manganese-phosphate cathode and iron phosphates. Last year, China put the know-how for making rare earth metals under similar restrictions, which subject overseas shipments to a higher degree of scrutiny.
The measures are relatively narrow in scope, for example targeting only the more advanced types of the named products. Battery cathodes can differ widely in performance and cost, and China has spearheaded efficiency gains in the lithium-iron-phosphate, or LFP, units that are gaining popularity in the global EV industry. (…)
Gallium, germanium, antimony and superhard materials are no longer allowed to be shipped to America, while sales of graphite have been placed under tighter controls. The metals are used in everything from semiconductors to satellites and night-vision goggles. (…)
