Economic Activity in Manufacturing Expanded in December, Overall Economy Grew for 116th Consecutive Month, Report Says

New Orders, Production, and Employment Growing,
Supplier Deliveries Slowing at Slower Rate; Backlog Unchanged Raw, Materials Inventories Growing; Customers’ Inventories Too Low, Prices Increasing at Slower Rate; Exports and Imports Growing

According to supply executives in the latest Manufacturing ISM^® Report On Business ®, economic activity in the manufacturing sector expanded in December, and the overall economy grew for the 116th consecutive month.

The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee: “The December PMI^® registered 54.1%, a decrease of 5.2 percentage points from the November reading of 59.3%. The New Orders Index registered 51.1%, a decrease of 11 percentage points from the November reading of 62.1%. The Production Index registered 54.3%, 6.3-percentage point decrease compared to the November reading of 60.6%. The Employment Index registered 56.2 percent, a decrease of 2.2 percentage points from the November reading of 58.4 percent. The Supplier Deliveries Index registered 57.5%, a 5-percentage point decrease from the November reading of 62.5%. The Inventories Index registered 51.2 percent, a decrease of 1.7 percentage points from the November reading of 52.9%. The Prices Index registered 54.9%, a 5.8-percentage point decrease from the November reading of 60.7%, indicating higher raw materials prices for the 34th consecutive month.

“Comments from the panel reflect continued expanding business strength, but at much lower levels. Demand softened, with the New Orders Index retreating to recent low levels, the Customers’ Inventories Index remaining too low — a positive heading into the first quarter of 2019 — and the Backlog of Orders declining to a zero-expansion level. Consumption continued to strengthen, with production and employment still expanding, but at much lower levels compared to prior periods. Inputs — expressed as supplier deliveries, inventories and imports — softened as well, with suppliers improving delivery performance, and inventories and imports declining.

Exports continue to expand, but at low levels consistent with November. Price increases relaxed to levels not seen since June 2017, when the index registered 53%. The manufacturing community continues to expand, but at much lower levels and at a sharp decline from November,” says Fiore.

Of the 18 manufacturing industries, 11 reported growth in December, in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Primary Metals. The six industries reporting contraction in December — in the following order — are: Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; and Plastics & Rubber Products.

Read the full report here.