Yields on U.S. government debt finished slightly higher on Friday after a manufacturing-related reading showed signs of improvement for the struggling sector.
In data released on Friday, the Institute for Supply Management’s manufacturing-sector report for December showed production rebounding and new orders rising further. The ISM’s manufacturing index rose to 49.3%, which was above economists’ median estimate and up from 48.4% previously. However, it still ended 2024 at a level that showed American manufacturers were in a mild slump. Meanwhile, new orders, a sign of future demand, jumped.
Read: Manufacturers end 2024 in slump, but rising orders raise hopes for recovery
“Looking ahead, we see significantly more positive signs for the U.S. manufacturing outlook than negative ones,” said economist Thomas Simons at Jefferies. “Rate cuts will slow into next year, but more are coming. The Trump administration is focused on doing things that (it thinks) will improve U.S. competitiveness in manufacturing, including deregulation, a more accommodative tax environment, and protectionist tariffs. The jury is still out on the net benefit of the tariffs, but the other positive forces are unambiguous.”
Also on Friday, Richmond Fed President Tom Barkin presented an upbeat outlook for the U.S. economy and said he expects “more upside than downside in terms of growth.”
Separately, the ICE U.S. Dollar Index DXY, a measure of the currency versus a basket of six major rivals, pulled back from a two-year high reached on Thursday. Traders had recently pushed up the dollar in anticipation of fewer rate cuts from the Federal Reserve this year and also because of what’s known as U.S. exceptionalism, or the theory that the U.S.’s advantages over the rest of the world in economic growth and productivity make it the best place to be for investors.
