The December ISM Purchasing Managers Report confirms that manufacturing continues its recovery and growth – the PMI was up 2.3 points to 55.9%.
“The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9 percent, its highest reading since April 2006 when it registered 56 percent. This month’s report is quite strong as both the New Orders and Production Indexes are above 60 percent. The sector may be benefiting from an excessive destocking cycle as indicated by the recent performance of the Customers’ Inventories Index. Customers’ inventories have been ‘too low’ for nine consecutive months, and this month’s index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn as evidenced by the seven industries still in decline.”
Fabricated Metal Products (NAICS 332)* is one of those seven industries “still mired in the downturn.” In December the fabricated metals respondents reported decreases in backlog, employment, customer inventories, and lower prices for materials. On the bright side, both production and export orders grew for this sector in December 2009.
We may not be out of the woods yet as an industry, but the sustained low employment and low customer inventories for our industry tell me that the overtime production machine will be gearing up and starting to hum for many of our shops this month.
Bottom Line: Dr. Ken Mayland of Clearview Economics had this to say about the ISM Composite Report for December:
“…if the current reading were to be sustained, that would be consistent with 4.6% real GDP growth. Folks: that’s “good” growth!”
* Precision Machining Industry is NAICS 332721, and thus a segment of Fabricated Metal Products Sector.