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Manufacturing Expansion Slips in December, Omicron Concern in Future

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing’s economic expansion slowed in December, the Institute for Supply Management said today. The group also said the Omicron variant of COVID-19 likely will complicate manufacturing in early 2022.

ISM’s manufacturing index, known as the PMI, registered at 58.7 percent last month. That was down from 61.1 percent in November.

The PMI is based on a survey of executives in 18 industries. An index reading above 50 percent indicates economic expansion, below that mark shows economic contraction. The December PMI was the lowest since January 2021 when the index was also 58.7 percent. The PMI averaged 60.7 percent in 2021.

The Tempe, Ariz.-based institute’s survey occurred before the impact of Omicron accelerated in late December. The variant has become the dominant form of COVID-19. Omicron may be less severe than earlier variants but it has led to a surge in cases and hospitalization.

“I think it’s going to hold us back a little bit,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. “It’s probably not going to shut down the economy.”

Fiore added Omicron’s primary impact may be on employment, such as increased absenteeism when workers get sick.

“The labor issue is going to continue as long as this virus is here,” he said. “I think this labor issue is going to be with us for a long time.”

With the December PMI, 15 of 18 industries reported expansion, including machinery, miscellaneous manufacturing, fabricated metal products and transportation equipment. Three industries reported economic contraction, including wood products.

ISM’s New Order Index dipped to 60.4 percent in December, down from 61.5 percent the month before. Thirteen of the 18 industries reported a gain in orders. New orders are considered an important barometer because they lead to increased production later.

The group’s Production Index slipped to 59.2 percent last month from 61.5 percent in November. Ten industries reported increases in output while four said production fell.

ISM’s Employment Index was mostly unaffected by Omicron in December, improving to 54.2 percent, up from 53.3 percent in November. Eight industries reported job gains.

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