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US Manufacturing Rebounds in December

Jan. 2, 2013
ISM survey reports that only seven of 18 manufacturing industries covered in the survey actually reported growth in the month.

WASHINGTON -- U.S. manufacturing activity expanded slightly in December after contracting the previous month, the ISM monthly survey showed Monday.

The Institute for Supply Management's manufacturing sector index rose to 50.7 last month from 49.5 in November, with 50 the break-even line between growth and contraction.

The index has hovered around that line for the past six months, the ISM said, reflecting weakness in both U.S. and global economic growth.

“Since an index level of 50 is the dividing line between growth and decline, the report on December manufacturing suggests that the sector’s activity fell in November but rose in December,” noted Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI).

“Unfortunately, the up-and-down pattern in manufacturing has been a characteristic of manufacturing activity since May 2012," Meckstroth added. "It is disappointing that the orders index posted very little growth in both November and December and that order backlogs continues to decline. Inventory levels are being drawn down sharply following an unwanted accumulation in the third quarter."

The New Orders Index remained at 50.3%, the same rate as in November, indicating growth in new orders for the fourth consecutive month.

The Production Index registered 52.6%, a decrease of 1.1 percentage points, indicating growth in production for the third consecutive month.

Both the Exports and Imports Indexes registered 51.5%, returning both indexes to growth territory following consecutive periods of contraction of six and four months, respectively.

“Manufacturing growth was all front-loaded in 2012,” Meckstroth said. “Because production overshot demand early in the year, the sector was trapped in a long period of see-saw growth around a declining trend.  Because of the first quarter surge, manufacturing industrial production will actually post 4% growth in physical volume in 2012, which is faster than the 2.1% growth in inflation-adjusted GDP."

Only seven of 18 manufacturing industries covered in the ISM survey actually reported growth in the month, and overall production growth slowed.

But the employment sub-index rose to 52.7 from 48.4, showing the industry returned to hiring at a modest clip in December.

“We do not expect another manufacturing production surge in first quarter of 2013,” Meckstroth concluded. “We do see strong growth in the housing-related industries, aerospace, and automobile production in 2013 but there are many other industries within manufacturing which should see little, if any, growth. MAPI forecasts manufacturing industrial production will increase only 2% in 2013. Although the growth will be less in 2013 than in 2014, manufacturers may feel better with a less volatile quarter-to-quarter pattern.”

Copyright Agence France-Presse, 2013, IW Staff

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