Manufacturing Stalls in December, Report Shows

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., chair of the Institute for Supply Management Manufacturing Business Survey Committee.

"The recent trend has been toward slower growt," 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."

The seven industries reporting growth in December - listed in order - are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Machinery; Primary Metals; and Miscellaneous Manufacturing.

Said a respondent in fabricated metal products, "The heavy truck industry is not recovering as expected. The latest forecast does not show an increase in orders until Q3 2008."

Steel was among the commodities up in price.

Manufacturing failed to grow in December as the PMI registered 47.7 percent, a decrease of 3.1 percentage points when compared to 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.

A PMI in excess of 41.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates that the overall economy is growing while the manufacturing sector is contracting. "The past relationship between the PMI and the overall economy indicates that the PMI average for January through December (52.2 percent) corresponds to a 3.2 percent increase in real gross domestic product (GDP) annually. In addition, if the PMI for December (47.7 percent) is annualized, it corresponds to a 1.8 percent increase in real GDP annually."

ISM's New Orders Index registered 45.7 percent in December. The index is 6.9 percentage points lower than the 52.6 percent reported in November. A New Orders Index above 49.1 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).
Five industries reported increases during December: Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Primary Metals.

ISM's Production Index fell to 47.3 percent in December, a decrease of 4.6 percentage points when compared to November's reading of 51.9 percent. An index above 49.8 percent, over time, is generally consistent with an increase in the Federal Reserve Board's Industrial Production figures.

Of the industries reporting in December, eight registered growth: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Machinery; Miscellaneous Manufacturing; and Primary Metals.

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.

The five industries reporting slower supplier deliveries in December are: Printing & Related Support Activities; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; and Primary Metals.


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. An Inventories Index greater than 42.4 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis' (BEA) figures on overall manufacturing inventories (in chained 2000 dollars). The four industries reporting higher inventories in December are: Wood Products; Primary Metals; Transportation Equipment; and Computer & Electronic Products.


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.
Eight industries reported higher customers' inventories during December: Plastics & Rubber Products; Textile Mills; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Chemical Products.

In December, the ISM Prices Index registered 68 percent, indicating manufacturers are paying higher prices on average when compared to 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. A Prices Index above 47.2 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Index of Manufacturers Prices.

In December, 14 industries reported paying higher prices: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; Primary Metals; Apparel, Leather & Allied Products; Paper Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Machinery; Computer & Electronic Products; and Transportation Equipment.

ISM's New Export Orders Index registered 52.5 percent in December, a decrease of 6 percentage points when compared to November's index of 58.5 percent. This is the 61st consecutive month of growth in export orders. The seven industries reporting growth in new export orders in December are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Transportation Equipment; and Computer & Electronic Products.

Imports of materials by manufacturers failed to grow during December as the Imports Index registered 48 percent, 0.5 percentage point higher than the 47.5 percent reported in November. This is the third month of contraction in the index following 69 consecutive months of growth. The three industries reporting growth in import activity for December are: Apparel, Leather & Allied Products; Transportation Equipment; and Machinery.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish