December Rebound Signals Manufacturing Sector Recovery

The U.S. manufacturing sector saw a modest rebound in production and an improvement in factory employment in December 2023. According to the Institute for Supply Management, the manufacturing PMI increased to 47.4 in December, breaking a two-month streak of stagnation at 46.7. This marked the 14th consecutive month with a PMI reading below 50, indicating a contraction in manufacturing. In fact, this is the longest stretch of contraction since August 2000 to January 2002.

Economists had predicted the index to rise to 47.1, slightly lower than the actual growth. While the ISM and other factory surveys may slightly overstate the weakness in manufacturing, the hard data suggests that the sector is slowly progressing. For instance, orders for long-lasting manufactured goods were considerably higher on a year-on-year basis in November. Additionally, though factory production has been weak, the rate of decline has been moderating in recent months.

Overall, the economy continues to expand with a growth rate of 4.9% annualized in the third quarter. Growth estimates for the October-December quarter are currently projected at around 2.0%. Looking ahead, the ISM survey reveals that new orders weakened slightly, while production at factories experienced an uptick. Moreover, the survey indicates a potential for further improvement in production, as customer inventory levels fell back below the 50 level after reaching their upper limit in November.

Furthermore, subdued demand continues to put pressure on prices at the factory gate, suggesting that goods deflation could persist for some time. Supplier deliveries saw a slight improvement, indicating faster deliveries, while factory employment showed signs of picking up, although it remains weak due to attrition, hiring freezes, and layoffs. Despite this, it’s important to note that the survey’s gauge of factory employment may not be a reliable predictor of manufacturing payrolls in the government’s closely watched employment report.

The Auto Industry 

In 2023, Ford Motor’s U.S. sales increased by approximately 7%, making it their best year since 2020. However, their growth was lower compared to the overall industry. Ford reported selling nearly 2 million vehicles, securing the third spot in overall U.S. sales, trailing behind Toyota Motor and General Motors.

While Ford’s sales in 2023 fell short of the industry’s growth, which reached over 15.6 million vehicles, it marked a significant improvement with a 12.3% increase from 2022. This performance was the best the industry has seen since 2019 when sales exceeded 17 million vehicles.

Despite challenges such as labor strikes and supply issues, Ford’s broad range of gas, electric, and hybrid vehicles, coupled with their exceptional dealers, still delivered solid growth and momentum. Notably, Ford’s electric vehicle sales showed promising growth, reaching 72,608 units in 2023, an 18% increase from the previous year. The popularity of the electric F-150 Lightning pickup, which saw price adjustments, surged by 74% during the fourth quarter. Additionally, sales of the Mustang Mach-E achieved their highest annual tally since its launch in 2021.

Despite these positive gains in electrified vehicles, they only accounted for approximately 10% of Ford’s overall sales in 2023. Hybrid sales, on the other hand, experienced a significant increase of 25% throughout the year and 55% in the fourth quarter.

For the 47th consecutive year, the Ford F-Series remained America’s best-selling truck, and for the 42nd year in a row, it was the best-selling vehicle in the country. With sales surpassing 750,000 units in 2023, the F-Series saw an impressive growth of approximately 15% compared to the previous year.

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