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ISM Index Rises to 50.7 in December

The overall economy grew for the forty-third straight time, while the manufacturing sector expanded after one months of contraction, the Institute for Supply Management reported Monday.

According to the ISM's monthly report on business, the ISM index climbed to 50.7 in December from 49.5 in November.

Economists polled by Thomson Reuters predicted the index would gain to 50.2.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion. A reading of 50 shows the sector was unchanged in the month.

"This month's PMI registered 50.7 percent, an increase of 1.2 percentage points from November's reading of 49.5 percent, indicating expansion in manufacturing for only the third time in the last seven months," said Bradley Holcomb, chair of the Institute of Supply Management's manufacturing business survey committee. "This month's PMI reading moved manufacturing off its low point for 2012 in November. The New Orders Index remained at 50.3 percent, the same rate as in November, indicating growth in new orders for the fourth consecutive month. The Production Index registered 52.6 percent, a decrease of 1.1 percentage points, indicating growth in production for the third consecutive month. The Employment Index registered 52.7 percent, an increase of 4.3 percentage points, indicating a resumption of growth in employment following only one month of contraction since September 2009. Both the Exports and Imports Indexes registered 51.5 percent, returning both indexes to growth territory following consecutive periods of contraction of six and four months, respectively. Comments from the panel this month are mixed, with some indicating a strengthening of demand and others indicating a continuing softness in demand. Additionally, many respondents express uncertainty about government regulations, taxes and global economics in general as we approach 2013."

The closely watched prices paid index increased to 55.5 from 52.5. The employment index climbed to 52.7 from 48.4 the prior month.

The production index decreased to 52.6 from 53.7, the new orders index held at 50.3; the supplier deliveries index grew to 54.7 from 50.3; the export orders index jumped to 51.5 from 47.0; and the imports index rose to 51.5 from 48.0.

The inventories index fell to 43.0 from 45.0; the customers' inventories index grew to 47.0 from 42.5; and backlog of orders surged to 48.5 from 41.0.

Respondents' comments included:

"Many Chinese sources are coming to us with cost reductions to maintain their current business volumes." (Machinery)

"Saw some stronger than expected demand in October and November, but December demand is weak comparatively." (Food, Beverage & Tobacco Products)

"We are seeing stabilization of orders and costs as well as production capacity for the first time in months." (Miscellaneous Manufacturing)

"We are experiencing a mix of results - domestic up year over year for industrial business, down in retail and down in LATAM, EU and Asia. Next year is anyone's guess - has never been so unpredictable." (Apparel, Leather & Allied Products)

"Black Friday was good, but forward economic visibility is foggy." (Computer & Electronic Products)

"The election is over; unemployment is dropping; consumer confidence is increasing as are home sales prices. We seem to be turning the corner. New car sales are increasing, which affects our customers." (Fabricated Metal Products)

"Business conditions have flattened out since last month. Overall production has leveled off from their previous reduction last month." (Transportation Equipment)

"Business is strengthening." (Furniture & Related Products)

"Prices and orders are staying stronger than normal for December - a pleasant surprise." (Wood Products)

"Uncertainty in additional government regulations and tax climate seems to be slowing orders." (Chemical Products)

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