Subscribe to our free, weekly email newsletter!


ISM reports strong manufacturing growth in December

By Jeff Berman, Group News Editor
January 03, 2011

Keeping in line with its strong momentum in the manufacturing sector gleaned from previous reports, the Institute of Supply Management (ISM) reported that the manufacturing sector remained on a growth path in December.

The ISM’s Manufacturing Report on Business stated that the index the ISM uses to measure the manufacturing sector—also known as the PMI—was 57.0 percent in December, which was 0.4 percent higher than November. Any reading that is 50 or better represents economic growth, and November represents the 17th consecutive month that the PMI is more than 50, along with the fact that the overall economy has been on a growth track for 20 straight months.

“The manufacturing sector continued its growth trend as indicated by this month’s report,” said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee, in a statement. “We saw significant recovery for much of the U.S. manufacturing sector in 2010. The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle. Additionally, manufacturers that export have benefitted from both global demand and the weaker dollar. December’s strong readings in new orders and production, combined with positive comments from the panel, should create momentum as we go into the first quarter of 2011.”

Some of the notable PMI readings from the December report include: New Orders at 60.9 percent (up 4.3 percent from November); Production at 60.7 percent (up 5.7 percent from November); Employment at 55.7 percent (down 1.8 percent from November); Inventories at 51.8 percent (down 4.9 percent from November); Backlog of Orders at 47.0 percent (up 1.0 percent from November); and Prices at 72.5 percent (up 3.0 percent from October).

In an interview, Ore said it is encouraging to see 17 straight months of manufacturing growth, and he noted that 2010 will go down as a very good year for manufacturing, with the overall 2010 manufacturing index coming in at 57.3.

“The best thing about the manufacturing outlook right now is that with New Orders above 60 and Production also above 60, it seems to signal that the first quarter of 2011 is going to hold up quite well,” said Ore. “With these levels intact, solid manufacturing growth is sustainable.”

Over the last two months, New Orders and Production have fallen more in line with each other, with a large spread between the two not typical unless something very negative or very positive is taking place, he said. And prior to November, Production was growing significantly faster than New Orders, which was a concern at that time. New Orders typically over time averages 0.3 of a point more than Production, and it usually leads Production, according to Ore.

Looking at inventories, the ISM report noted that Inventories were down nearly 5 percent at 51.8, and Customers; Inventories were off by 5.5 percent in December at 40.0.

Ore said there has been a remarkable period in the last year, where the destocking cycle was quite extended, followed by a significant re-stocking period that has yet to catch up.

“The operative thought process, with Inventories dropping to 51.8 is that there is marginally an increase in December over November but not at the same rate as what occurred in November,” he said. “It tells me inventories are becoming balanced, although we are not there yet. And Customer Inventories falling would indicate we are not there yet in terms of balancing of inventories, but it will start to slow in the first quarter in my opinion and we will see some catch-up. Anecdotally, I am hearing from a number of [shippers] that they still have not caught up on their inventories. They had lowered inventories so significantly and then demand picked up. When they tried to rebuild inventories, demand picked up significantly and they were running the demand more than they were able to catch up on inventory.”

Click here for more ISM related articles. 

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Lyon, France-based Norbert Dentressangle, a $5.5 billion global third-party logistics (3PL) services provider focused on global logistics, transport, ocean, and air services, said today it has acquired Des Moines, Iowa-based Jacobson Companies, a value-added warehousing (VAW) company, for $750 million from private equity firm Oak Hill Capital Partners.

Download the newly released research report, "Transportation Management Systems" conducted by Peerless Research Group (PRG) on behalf of Supply Chain Management Review and Logistics Management magazines. Learn what logistic experts are saying about their current supply chain technology infrastructures, how they tackle the transportation component, and revealed the gaps that still need to be filled in order to attain end to-end visibility of a streamlined supply chain.

From cost center to growth center. Get insightful opinions on changes in the marketplace from this independent survey of warehouse personnel. Motorola Solutions examined the current warehousing marketplace in our 2013 Warehouse Vision Report, conducted April-May of 2013.

Even though not all publicly-traded less-than-truckload carriers (LTL) have posted second quarter earnings yet, the early consensus for those that have issued results is looking very good.

The advance estimate for second quarter GDP at 4.0 percent could serve as a sign of a steadier and improving economy.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA