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Manufacturing Expansion Accelerates in December

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing growth accelerated in December fueled by new orders for products, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, reached 60.7 percent. That was up from 57.5 percent in November and the highest PMI level of 2020.

The index reflected “a lot of good dynamics,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call.

Sectors such as commercial construction and aerospace are struggling “but the others are doing well,” Fiore said.

The December PMI reflects how manufacturing recovered from the first half of 2020. During that period, factories shut down to implement new safety procedures because of the COVID-19 pandemic. After plants re-started, manufacturing momentum improved over the year’s second half.

New orders received by manufacturers have bolstered industry, Fiore said.

“As long as you have strong new orders, you can deal with the rest,” he said.

The PMI is based on a survey of more than 800 purchasing and supply executives across 18 industries. A PMI above 50 percent indicates expansion while below that level shows economic contraction. The PMI reached a low of 41.5 percent in April, when the impact of COVID-19 was the most severe on manufacturing. The index averaged 52.5 percent for 2020.

In December, ISM said 16 of 18 industries reported economic growth, including apparel, fabricated metal products, machinery, transportation equipment and miscellaneous manufacturing. Only two sectors, printing and non-metallic mineral products, reported economic contraction.

The group’s New Orders Index rose to 67.9 percent last month. ISM said 13 of 18 industries reported an increase in new orders. Three industries reported a decline.

ISM’s Production Index reached 64.8 percent in December, with 13 industries reporting a rise in output.

The group’s Employment Index edged into positive territory last month at 51.5 percent. That was an improvement from 48.4 percent in November. ISM said eight of 18 industries reported employment gains, while five reported job cuts.

Fiore said manufacturing faces some uncertainty in the first part of 2021.

COVID-19 cases are on the rise in much of the United States. New vaccines have been developed but aren’t being deployed as quickly as U.S. officials had projected. The virus is “our biggest headwind,” Fiore said.

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