New Year Begins with a Whimper Courtesy of ISM Manufacturing

* The U.S. ISM Manufacturing index for December hit just 32.4, the weakest level since 1980

* Production, new orders, backlog of orders, and employment all declined significantly

* The manufacturing sector appears set to remain a significant drag on the U.S. economy

The U.S. ISM Manufacturing index for December started the data calendar for the New Year with more of a whimper than a bang. The measure declined to just 32.4, far less than the prior month's 36.2, and less than the market expectation for a 35.4 reading. Indeed, the new level is the lowest since 1980, speaking to the depth of the economic correction in the U.S. manufacturing sector.

Sadly, the composition of the report speaks to broadly-based weakness, as every major sub-component recorded notable declines, and all but one minor measure was well below the 50-threshold that differentiates expansion from contraction. Production fell from 31.5 to 25.5, new orders went from 27.9 to 22.7, the backlog of orders slipped from 27.0 to 23.0, new export orders eased from 41.0 to 35.5, and employment dropped from 34.2 to 29.9. Perhaps the only good news was that the prices paid component fell further, from 25.5 to 18.0, though the redeeming feature of this development - lower inflation - is starting to wear thin as deflation concerns grow.

As if it needed restating, this report emphasizes once again that the U.S. economy is in a recession, as any figure below about 44 for the headline index has historically matched up well with this condition. And to the degree that the U.S. slowdown is not actually a business-led slowdown - driven rather by sour housing, financial, and consumer factors - it speaks to both the breadth and depth of the slowdown.