ISM's December Manufacturing Index Rises

By John S. McClenahen Economists generally expected the Institute for Supply Management's (ISM) manufacturing index to close out 2004 with a gain. It did. ISM's index, officially known as the PMI, rose to 58.6% in December, up eight-tenths of a percentage point from November's 57.8%, the Tempe, Ariz.-based ISM reported on Jan. 3. A figure above 50% indicates that the manufacturing sector of the economy generally is growing; a figure below 50% signals that the sector is contracting. New orders, production and employment all grew in December, ISM said, although the rates of growth for production and employment were slower than in November. December's PMI, driven by a significant increase in the new orders index, is very encouraging as growth . . . accelerated for the second consecutive month," noted Norbert J. Ore, chair of ISM's manufacturing business survey committee and group director for strategic sourcing and procurement at Georgia-Pacific Corp. However, purchasing and supply executives at the same time expressed continued concerns about prices for energy and basic commodities. "While many manufacturers are enjoying strong sales, there is concern that inflation is taking its toll on margins, thus reducing profits," ISM said. Prices for 34 categories, from alloy steel to vinyl, were up in December, according to the ISM report on manufacturing business activity, which is based on data from purchasing and supply executives in more than 400 industrial companies.

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