Manufacturing Activity Expands in December, New Orders Index Nears 70%

CHICAGO An employee operates a straight knife machine to cut through denim patterns at a facility on Nov 8 2017. — Bloomberg

The numbers:The Institute for Supply Management (https://www.instituteforsupplymanagement.org/about/MediaRoom/newsreleasedetail.cfm?ItemNumber=31000) said Wednesday its manufacturing index rose to 59.7%, the second-highest reading of the year, from 58.2% in November.

The group's manufacturing index, known as the PMI, was 59.7%, up from 58.2% in November, according to a monthly report. The production index also climbed to 65.8 in December from 63.9 in November, indicating a decent acceleration in the pace of growth.

Fiore, chair of the ISM, said: "This indicates growth in manufacturing for the 16th consecutive month, led by strong expansion in new orders and production with hiring growing at a slower rate and supplier deliveries continuing to struggle".

The employment index was the only metric to experience a decrease in December, falling 2.7% to 57%. Of the eighteen manufacturing industries, sixteen reported growth, while two reported contraction.

The inventories index registered 48 points, up 1.5 points from the previous month. Eight of the ten index components grew, while the inventories and customers' inventories indexes both contracted.

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New business received by manufacturers continued to rise in December, with the rate of expansion accelerating to a ten-month high.

According to ISM, any reading above 50 points shows an increase in factory activity.

"Our belief is that investment spending will be stimulated in 2018 by the cut in corporate taxes and this will be a strong positive for manufacturing", RDQ said in a research note, adding that the jump in new orders "is certainly consistent with this thesis". The production index was like the one for new orders in terms of its overall strength, exceeding 60 since its June reading.

Meanwhile, prices for raw materials (up from 65.5 to 69.0) have remained highly elevated, with the measure up 3.5 percent from November's level.

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