Key Focus This Weeks: U.S. NMI & Nonfarm Payrolls

Manufacturing PMI Recap: US, China, EU, Japan & Korea (Latest)

Key manufacturing data from major economies, including the U.S., China, Japan, and the Eurozone, revealed continued divergence in global manufacturing performance in December. While U.S. demand showed signs of recovery with new orders and production returning to expansion, the Eurozone remained mired in contraction due to weak demand and heightened political uncertainty. In Asia, China maintained expansion for the third consecutive month, supported by policy measures, though internal demand stimulation remained limited. Meanwhile, Japan showed optimism for the future despite sustained contraction, and South Korea returned to contraction as both domestic and external demand weakened. United States: Demand Rebounds, but Industry Divergence Persists The U.S. ISM Manufacturing PMI for December rose to 49.3 (prior: 48.4), marking the ninth consecutive month in contraction but also the highest reading in nine months. Sub-indices revealed encouraging trends, with the new orders index climbing to 52.5 (prior: 50.4) and the production index returning to expansion at 50.3 (prior: 46.8). The supplier delivery index also improved to 50.1 (prior: 48.7). Inventory levels rose slightly, with the inventory index at 48.8 (prior: 48.3), while the new orders-to-inventory ratio widened to 5.8 (prior: 1.9), indicating an overall improvement in demand. However, demand conditions varied significantly across industries. While strong demand in computers, electronics, and electrical equipment offset weaknesses in food, transportation equipment, and fabricated metals, the overall recovery momentum remained uneven. Read more at Datatrack Euro Area: Weak Demand and Political Instability Deepen Contraction The Eurozone's December Markit PMI stood at 45.1 (previous 45.2), reflecting further deterioration in new orders and production. The production index posted its largest decline since October 2023, while inventories were depleted at an accelerating pace without signs of replenishment. Employment contraction eased slightly but remained significant, and stagnant input prices led firms to lower output prices further to stay competitive. Germany: The December Markit PMI dropped to 42.5 (prior: 43.0), with political instability and concerns over U.S. tariff policies exacerbating contractions in new orders and production, both hitting their largest declines in 2024. Employment and backlogs also fell amid weakening demand. France: The Markit PMI fell to 41.9 (prior: 43.1), the lowest since May 2020, as political uncertainty following government instability further dampened demand. Companies accelerated inventory reductions, resulting in the steepest decline since 2009, while production and new orders continued to contract. Business confidence remained subdued. Italy: The Markit PMI edged up to 46.2 (prior: 45.5), reflecting weak Eurozone demand alongside high energy costs and intensified competition in the automotive sector. Firms continued to deplete inventories despite modest cost growth, while weak demand pushed output prices lower. Read more at Datatrack   China: Third Consecutive Month of Expansion, but Limited Policy Impact on Domestic Demand China’s Manufacturing PMI for December registered at 50.1 (prior 50.3), maintaining expansion for the third straight month but slightly below market expectations of 50.3. Sub-indices showed continued growth in production (52.1, previous 52.4) and new orders (51.0, previous 50.8), driven by policies promoting consumer goods trade-ins and industrial equipment upgrades. However, employment (48.2, prior 48.1) remained in contraction, and the new orders-to-customer inventory ratio fell to 3.1 (prior 3.4), reflecting limited effectiveness of stimulus measures in boosting internal demand. Increased market competition and overcapacity led to further declines in input prices (48.2, prior 49.8) and output prices (46.7, prior 47.7), sustaining deflationary risks. Read more at Datatrack ▶ Read More China's Manufacturing PMI Expands for the Third Consecutive Month in December Japan: Sixth Consecutive Month of Contraction, but Optimism Persists Japan’s December Manufacturing PMI was 49.6 (prior: 49.0), marking six consecutive months of contraction as new orders and production continued to shrink. Despite this, employment growth reached its highest level since April 2024. However, declining backlogs and ongoing inventory reductions indicated persistent demand weakness. The yen's depreciation further pushed up input costs, prompting firms to pass on higher prices to customers, resulting in the fastest output price growth in five months. Nonetheless, businesses remained optimistic about future production expansion, particularly in the automotive and semiconductor sectors. Read more at Datatrack South Korea: Weak Demand and Record Low Business Confidence South Korea’s December Manufacturing PMI fell to 49.0 (prior: 50.6), reflecting weaker domestic conditions and slowing demand from the U.S. and China. New orders and production declined further, while export orders showed only modest growth. Inflationary pressures intensified, and firms raised output prices at the fastest rate since November 2023. Beyond economic challenges, uncertainty over U.S. tariff policies heightened concerns for South Korea’s manufacturing sector. Business confidence for the next 12 months turned negative for the first time since July 2020. Excluding the COVID-19 period, it was the lowest level recorded since the survey began in 2012. Global manufacturing in December continued to show pronounced divergence. In the U.S., manufacturing remained in contraction for the ninth month, but production and new orders returned to expansion, signaling initial signs of a demand rebound. However, industry-specific disparities highlighted uneven recovery momentum. In contrast, the Eurozone faced deepening contraction driven by weak demand and political uncertainty, with Germany, France, and Italy remaining the hardest-hit regions. Meanwhile, China sustained its expansion for the third month, but internal demand stimulation remained limited. Japan exhibited resilience in business sentiment despite prolonged contraction, while South Korea faced mounting challenges with weakened demand and record-low business confidence.