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Latest Manufacturing Data Had Some Hidden Plusses

December report showed transportation and freight fees grew at slowest rate in six months, Action Alerts Team notes.
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Stocks are up, unemployment is down and wages are strong. But it can’t all be good news on the economic front, right?

“Soon after the stock market opened for trading [on January 3], Markit Economics released its US December Manufacturing PMI," the Action Alerts Plus team noted. The figure "slipped to 57.7 for the month vs. 58.3 in November and a tick lower than the expected reading of 57.8. As a reminder, a reading above 50 denotes expansion, which means the domestic manufacturing economy continued to grow during the month of December."

 They added that "the month over month dip was chalked up to subdued output and new order growth which was offset by inventory builds as manufacturers ‘noted further constraints on production due to severe material shortages and input delivery delays.’”

Taken as a whole, "the news is a mixed bag. While Markit Economics’ report reflects continued expansion in U.S. manufacturing, the rate of growth has slowed. It’s good news that the economy continues to rebuild. That said, there’s a long way to go before the U.S. economy fully recovers from covid."

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One relative bright spot: “While transportation and freight fees fueled another increase in input costs during December, Markit's finding suggest it was the slowest such increase in the past six months, a potential sign the worst may be entering the rear view," they wrote. 

But there's always the other hand in economics, and in this case "material shortages, port congestion and a lack of availability of trucking and shipping containers all reportedly led to a substantial deterioration in vendor performance during the month."

So it appears that "many of the issues that plagued the manufacturing economy during October and November remained in December."

The real question is how this data will develop in January. Continued easing of shipping and logistics could signal a strong 2022 for manufacturing, although another dip in the manufacturing PMI could show trouble ahead. 

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