NEW YORK - The overall economy grew for the eighth straight time after seven months of contraction, while the manufacturing sector expanded for the fifth time after eighteenth months of contraction, the Institute for Supply Management reported this morning.
According to the ISM’s monthly report on business, the ISM index gained to 55.9 in December from 53.6 in November.
Economists polled by Thomson Reuters predicted the index would rise to 54.3.
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.
“The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9 percent, its highest reading since April 2006 when it registered 56 percent," said Norbert J. Ore, chair of the Institute of Supply Management's manufacturing business survey committee. “This month’s report is quite strong as both the New Orders and Production Indexes are above 60 percent. The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers’ Inventories Index. Customers’ inventories have been ‘too low’ for nine consecutive months, and this month’s index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn, as evidenced by the seven industries still in decline.”
The closely watched prices paid index rose to 61.5 from 55.0. The employment index was at 52.0, up from 50.8 the prior month.
The production index increased to 61.8 from 59.9, the new orders index rose to 65.5 from 60.3; the supplier deliveries index climbed to 56.6 from 55.7; the export orders index decreased to 54.5 from 56.0; and the imports index grew to 55.0 from 51.5.
The inventories index increased to 43.4 from 41.3; the customers’ inventories index slid to 35.0 from 37.0; and backlog of orders fell to 50.0 from 52.0.
Respondents’ comments included:
“Capital is tight. The forecast has been lowered for 2010.” (Chemical Products)
“Nice rebound for our consumer business.” (Nonmetallic Mineral Products)
“Demand from automotive [manufacturers] remains strong, with some plants not having extended shutdowns during the Christmas holiday.” (Fabricated Metal Products)
“Still not seeing any increase in production as the economic indicators are suggesting.” (Electrical Equipment, Appliances & Components)
“Business remains steady and strong.” (Primary Metals)
