ISM: Manufacturing rang out 2014 strong

ISM: Manufacturing rang out 2014 strong

Annualized, December's performance equates with a 4.1% rise in real GDP

Over the last month of last year, both national economic activity in the manufacturing sector and the overall U.S. economy grew yet again, per the ISM Manufacturing Report On Business for December released this morning by the Institute for Supply Management (ISM).

ISM stated that the positive performance of the Manufacturing segment is indicated by ISM’s PMI (Purchasing Managers’ Index) registering 55.5% for the month just ended.

That mark represents a drop of 4.2 percentage points compared to the November PMI reading of 58.7%. (A reading above 50% indicates the manufacturing economy is generally expanding; below 50%, suggests the manufacturing segment is “generally contracting.”)

What’s more, ISM pointed out that because “a PMI above 43.2%, over a period of time, generally indicates an expansion of the overall economy… the December PMI indicates growth for the 67th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 19th consecutive month.”

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, remarked that “the past relationship between the PMI and the overall economy indicates that the average PMI for January through December (55.8%) corresponds to a 4.2% increase in real gross domestic product (GDP) on an annualized basis.

“In addition,” he added, “if the PMI for December (55.5%) is annualized, it corresponds to a 4.1% increase in real GDP annually.”

Of the 18 industries ISM surveyed, 12 reported growth in this order:

  1. Printing & Related Support Activities
  2. Fabricated Metal Products
  3. Primary Metals
  4. Furniture & Related Products
  5. Food, Beverage & Tobacco Products
  6. Petroleum & Coal Products
  7. Textile Mills
  8. Paper Products
  9. Miscellaneous Manufacturing
  10. Electrical Equipment
  11. Appliances & Components
  12. Transportation Equipment

And here are the six industries that reported contraction in December in order:

  1. Plastics & Rubber Products
  2. Wood Products
  3. Machinery
  4. Nonmetallic Mineral Products
  5. Chemical Products
  6. Computer & Electronic Products

Comments made by supply executives responding to the survey included these half-dozen telling remarks:

“Class 8 trucks and RV business is very strong.” (Transportation Equipment)

“Retail sales this holiday season are shaping up to be much improved over last year.” (Food, Beverage & Tobacco Products)

“Collapse of oil prices is supporting negotiations for significantly lower petrochemical related material prices. Sales are slowing down as buyers reduce inventory in anticipation of lower prices.” (Chemical Products)

“Energy prices falling are a blessing and a curse for us. We will experience downside as projects are canceled by energy companies, but suspect manufacturing in the US will improve driving upside in that space.” (Apparel, Leather & Allied Products)

“West Coast port issues have greatly impacted our incoming materials. We are air freighting many parts from Japan and Asia to support production while parts sit at the dock.” (Fabricated Metal Products)

“The West Coast ports slow-down is really affecting deliveries of our Asian purchases.” (Machinery)

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