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December Manufacturing PMI Beats Expectations, Climbs 3.2%

Jan. 5, 2021
The employment index returned to growth last month after a concerning dip in November.

The Institute for Supply Management reported that its Purchasing Manager’s Index for manufacturing rose 3.2% in December to 60.7%. The latest PMI indicated that manufacturing is growing at a faster rate than in November, when the PMI registered 57.5%.

December now marks a seventh month of growth for the manufacturing sector as it continues to recover from the effects of the COVID-19 pandemic alongside the overall economy, which has grown each of the past eight months. The ISM’s indexes for new orders and production both grew at a faster rate than in November, and its employment index, which contracted two months ago, returned to growth territory.

Manufacturing companies’ backlog of orders grew at a faster rate as that index grew 2.2 points to 59.1%. The indexes for imports and new export orders both fell very slightly but remained in growth territory.

Supplier deliveries slowed in December, with 39.5% of respondents reporting slower deliveries in December compared to 27.5% of respondents in November.

Prices for manufactured goods increased dramatically: the prices index rose 12.2 points to 77.6% in December, its highest point since May 2018, which the ISM identified as the peak of the last manufacturing expansion cycle. 57.8% of manufacturers reported higher prices in December, compared to 39.7% who reported stable prices and only 2.6% reporting falling prices. Timothy Fiore, president of the ISM, identified aluminum, copper, steel, petroleum-based products, transportation costs, electronic components, corrugate, temporary labor, and lumber as products that saw “record price increases.”

The price of difficult-to get PPE gloves also rose. Gloves for PPE have now been in short supply for 10 months, and PPE face masks have been in short supply for two months. Aluminum, corrugate boxes, electrical and electronic components, semiconductors, and steel were all also difficult for manufacturers to acquire.

Comments from manufacturing executives reflected frustration with COVID alongside optimism for the new year, especially as far as sales were concerned. A machinery executive noted that sales were now “slightly above” pre-COVID levels, and a member of the electrical equipment and appliances noted “stronger than expected” demand for products.

A transportation equipment executive said the pandemic was causing supply chain issues for Tier-1 and Tier-2 suppliers, but that “end-customer demand for products is keeping production and future outlook positive.” Members of the food and beverage as well as the plastics and rubber industries also specifically complained about difficulty with suppliers.

“COVID-19 is affecting us more strongly now than back in March,” said a member of the food and beverage industry, who said their operations were hampered by supplier employee shortages and COVID-related logistics issues.

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