Manufacturing stalls in December

Economic activity in the manufacturing sector failed to grow in December following 10 consecutive months of expansion, while the overall economy grew for the 74th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Norbert J. Ore, C.P.M., chairman of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

“The recent trend has been toward slower growth,” Ore said. “However, December was apparently a very tough month as new orders, production, and employment were all below the break-even mark of 50 percent. Industries close to the housing market appear to be struggling more than others, and those involved in exports seem to be doing better. Slower demand appears to be more of a problem than excessive inventories based on the respondents' comments.”

Manufacturing failed to grow in December as the Purchasing managers' Index (PMI) registered 47.7 percent, a decrease of 3.1 percentage points when compared with November's reading of 50.8 percent. This is the first month that the manufacturing sector has failed to grow since January 2007. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The delivery performance of suppliers to manufacturing organizations continued to slow in December as the Supplier Deliveries Index increased 1.6 percentage points to 53.3 percent. A reading above 50 percent indicates slower deliveries.

Manufacturers' inventories contracted again in December as the Inventories Index registered 45.5 percent, which is 1.4 percentage points lower than November's reading of 46.9 percent. This is the 17th consecutive month of inventory liquidation.

The ISM Customers' Inventories Index registered 51.5 percent in December, an increase of 2.5 percentage points when compared to November. The index indicates that respondents believe their customers' inventories are too high at this time.

In December, the ISM Prices Index registered 68 percent, indicating manufacturers are paying higher prices on average versus November. While 43 percent of respondents reported paying higher prices and 7 percent reported paying lower prices, 50 percent of supply executives reported paying the same prices as the preceding month.

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