A gauge tracking manufacturing activity is flashing red in countries across the world. The Institute of Supply Management’s Producer Manufacturing Index (PMI) for the US contracted for a second consecutive month in December, falling to 48.4 last month from 49.0 in November.
China’s official PMI tracked by the National Bureau of Statistics also fell sharply, hitting 47.0 from 48.0 in November. Singapore is down, too: 49.7 versus 49.8 the previous month. And Japan saw its factory activity post the sharpest drop in over two years.
Less gloomy, but far from reassuring, is the picture from Europe. The S&P Global PMI for France recorded 49.2 last month—below the 50 mark that separates growth from contraction, though an improvement from November’s 48.3. Germany’s S&P Global PMI reading is also solidly in contraction territory: 47.1, but an uptick from November’s 46.2.
Is there a silver lining to all this? Hardly. But worth noting: Slowing manufacturing activity could drive a fall in consumption of diesel and other distillate fuel oils, helping replenish depleted distillate inventories.
The US job market stays tight
The December US jobs report, out Friday, shows a still-strong labor market, albeit also signs of slowing wage growth. Overall, employers added 223,000 jobs in December, the smallest gain in two years (though above the 200,000 predicted by economists). Unemployment inched down to 3.5% from 3.6%, matching its lowest rate in decades. And labor force participation ticked up to 62.3%, from 62.2% the previous month, adding to hopes that a sustained increase back to pre-pandemic levels can help ease labor shortages.
Meanwhile, wage growth is slowing. Average hourly earnings for private-sector employers rose 4.6% in December year-on-year, less than the 5% forecast by economists, and down from the 4.8% in November (which itself was revised down from 5.1%). Wage growth has been on a downward trend since June; the latest data further assuaged fears of a wage-price spiral.
Markets seem to think these are the ingredients needed for the much-hoped-for soft landing: the Dow rallied about 700 points on Friday (January 6) following the data release, while the S&P climbed 2.3% and the Nasdaq rose 2.6%. But that enthusiasm doesn’t address the question of how a still-tight labor market might resolve inflationary pressures – or responsive interest rate hikes.
Average hourly earnings (total private), year-on-year percent change
Source: Bureau of Labor Statistics
VC activity cools
New and existing venture funds raised a record 162.6 billion USD across 769 funds in 2022, according to Pitchbook data. But a lot of that money is sitting undeployed: Funding for US startups fell by 31% from its peak in 2021, to 238.3 billion USD compared to a record 344.7 billion USD the previous year. That means the volume of unused funds is at a record high, as investors have held back amid rising interest rates, geopolitical uncertainty, and market volatility and pessimism.