Manufacturing activity continues to expand

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Updated Jan 10, 2010

ManufacturingEconomic activity in the manufacturing sector expanded in December for the fifth consecutive month, and the overall economy grew for the eighth consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business issued Monday, Jan. 4. 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.

“This month’s report is quite strong as both the New Orders and Production Indexes are above 60 percent,” says Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers’ Inventories Index.”

The PMI was up 2.3 percentage points when compared to November’s reading of 53.6 percent, indicating continuing recovery in the sector at a faster rate of growth. 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 41.2 percent, over a period of time, generally indicates an expansion of the overall economy.

In December, nine of the 18 manufacturing industries reported growth: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Machinery; Electrical Equipment, Appliances & Components; Transportation Equipment; Paper Products; Furniture & Related Products; and Food, Beverage & Tobacco Products. The seven industries reporting contraction in December are Wood Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; Printing & Related Support Activities; and Fabricated Metal Products.

Ore says customers’ inventories have been “too low” for nine consecutive months. “This month’s index is the lowest reading since the inception of the index in January 1997,” he says. “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.”