The IHS Markit and ISM manufacturing indexes diverged sharply again in December, with ISM's gauge showing the worst manufacturing report in a decade and Markit's showing a solid reading well above 50, which is the line separating expansion from contraction.
What's happening: One reason for this divergence, highlighted by IHS Markit's chief business economist Chris Williamson in a recent blog, may be that IHS explicitly tells respondents to "confine their reporting to US facilities/factories."
- "ISM data could therefore be more heavily influenced by global conditions facing ... US-owned companies than the IHS Markit data," Williamson writes.
State of play: Markit's global manufacturing index and the overwhelming majority of its indexes outside the U.S. declined sharply in December, but the U.S. held firm, dipping just 0.2 points from November's total.
What it means: Markit's gauge may more accurately reflect the situation in the U.S. However, because global supply chains are so interconnected, the situation for American manufacturing companies may be as dire as the ISM's survey suggests.
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