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ISM Up For December

Don Hogsett, January 10, 2005

Tempe, Ariz. —Climbing out of an earlier trough, the U.S. manufacturing sector grew for a second straight month in December, and the sector appears poised to get the new year off to a strong start, the nation's purchasing managers reported.

The Institute for Supply Management (ISM) said its monthly gauge of manufacturing activity was up 0.8 percent during December to a level of 58.6 after gaining 1 percent last month. Any reading above 50 indicates expansion, while beneath points to a weakening in the sector, one of the biggest drivers of the U.S. economy.

The December reading, “driven by a significant increase in the New Orders Index, is very encouraging as growth has accelerated for the second consecutive month,” said Norbert Ore, chair of the ISM's Manufacturing Business Survey Committee. This completed a strong year for manufacturing, he pointed out, “as the overall index averaged above 60 for 2004. While there is continuing upward pressure on prices, the rate of increase is slowing and definitely trending in the right direction.”

Pushing the overall index higher during December was a notably strong gain in the New Orders Index, which zoomed up 5.9 percentage points In other areas of strength, the Order Backlogs Index climbed 6.5 percent and Export Orders accelerated 5.3 percentage points.

But there were still a few thorns among the roses, notably inflation fears, said Ore. “The sector struggles with inflationary pressures, but strong demand is a consolation,” he said.

December snapshot
Manufacturing benchmarks
Month-over-month percentage-point change

Source: Institute for Supply Management
Purchasing Managers' Index +0.8%
New Orders +5.9
Production -0.1
Employment -4.9
Inventories +2.7
Customers' Inventories +0.5
Prices Manufacturers Pay -2.0
Order Backlogs +6.5
Export Orders +5.3
Imports +2.7