Modest Pace of Manufacturing Growth in 2012

Jan. 3, 2012
MAPI says ISM index is encouraging.

The Institute for Supply Management reported earlier this week that its December manufacturing index hit 53.9%, higher than November's 52.7%. The sector grew at a faster rate than the 51% expected by economists.

"The December report on manufacturing is very encouraging," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). In the last 25 years, the ISM index averaged 52.4, and thus December's 53.9 index is well above average; it showed advances in nearly all the major componentsparticularly in production, employment, and backlogs. The only negative aspect to the report is that imports improved faster than exports.

"The first report on manufacturing activity for the month of December should ease fears that the economy is slipping back into recession," he added, "as a recession would show up first in manufacturing activity, and this is not the case. That said, we expect only a modest pace of growth in manufacturing production this new year. Consumers are constrained by debt and this is restraining the pace of growth. Business equipment investment, oil country goods and equipment, and motor vehicles should be the growth drivers in 2012."

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