ISM: Manufacturing's Growth Slows In December

Economic activity in the manufacturing sector of the U.S. economy grew for the 31st consecutive month in December 2005, but the pace was slower than in November, according figures released Jan. 3 by the Tempe, Ariz.-based Institute for Supply Management (ISM). Its closely watched PMI index slipped to 54.2% last month from 58.1% in November, a 3.9 percentage-point decline. An index figure above 50% indicates that the manufacturing sector generally is expanding; a figure below 50% indicates the sector is contracting.

Manufacturing new orders, production and employment all grew more slowly in December than in November. ISM's new orders index for manufacturing fell to 55.5% in December, a 4.3 percentage-point drop from November's 59.8%. The production index fell to 57% in December, a 3.6 percentage-point drop from November's 60.6%. And the employment index fell to 52.7% in December, a 3.9 percentage-point drop from November's 56.6%.

On the positive side, the prices that manufacturers pay for materials fell dramatically in December, with ISM's prices index falling 11 percentage points to 63% from November's 74%. "We saw a significant slowing in the upward pricing spiral that had been a source of continuing concern for manufacturers," affirmed Norbert J. Ore, chair of ISM's manufacturing business survey committee.

ISM's figures are derived from data compiled by purchasing and supply executives in more than 400 U.S. industrial companies.

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