The Institute for Supply Management (ISM) said that manufacturing activity expanded robustly in December, with new orders increasing at their fastest pace since January 2004. The ISM Manufacturing Purchasing Managers’ Index (PMI) rose from 58.2 in November to 59.7 in December, its best reading since September’s 13-year high (60.8). The headline number in the latest survey was boosted by healthy gains in new orders (up from 64.0 to 69.4), as noted above.
It was the seventh consecutive month that the sales measure has exceeded 60, which would signify very spirited growth in demand. In addition, exports (up from 56.0 to 58.5) also experienced strong growth in December. Indeed, the sample comments tended to echo the optimistic outlook, citing strong U.S. and global sales for the sector.
Looking at other key measures in the report, production (up from 63.9 to 65.8), supplier deliveries (up from 56.5 to 57.9) and imports (up from 54.5 to 57.5) also increased more briskly in December. The production index was like the one for new orders in terms of its overall strength, exceeding 60 since its June reading. With that said, employment (down from 59.7 to 57.0) slowed somewhat in the latest data, even as hiring remained at healthy rates overall. In general, the labor market has tightened considerably, with the employment index averaging 59.3 over the past five months, up from a more modest 52.8 one year ago.
Meanwhile, prices for raw materials (up from 65.5 to 69.0) have remained highly elevated, with the measure up 3.5 percent from November’s level. This reflects a rebound in some commodity costs, even as overall pricing pressures have remained modest. In other news, inventories (up from 47.0 to 48.5) contracted for the third straight month. This could indicate stronger production in the months ahead, however, especially with the enthusiastic demand figures discussed above.