It was the weakest reading since May 2020, when the economy was hit by the first wave of COVID-19 cases, and pushed the index just below the 48.7 level, which the ISM says is consistent with a recession in the economy.
But with the job market continuing to generate jobs apace and support consumer spending, it’s unlikely the economy is in a recession.
A PMI reading below 50 indicates a contraction in the manufacturing sector, which represents 11.3% of the US economy. Economists polled by Reuters had expected the index to come in at 48.5.
The Federal Reserve’s fastest interest rate hike cycle since the 1980s is curbing demand for goods, which are often bought on credit. Americans are also shifting from spending on goods to spending on services as the country heads into the post-pandemic era.
The ISM index of prices paid by manufacturers fell to 39.4 from 43.0 in November. Outside of the April 2020 crash, it was the lowest reading since February 2016 and the ninth straight monthly.
