December ISM Manufacturing Report- Mixed Message

The December ISM Manufacturing Report is out, and the headline story is good news.

But the full report is a bit of a mixed bag for our industry.

Manufacturing is back in expansion mode as the Purchasing Manager’s Index, “‘The PMI™,’ registered 50.7 percent, an increase of 1.2 percentage points from November’s reading of 49.5 percent, indicating expansion in manufacturing for only the third time in the last seven months. This month’s PMI™ reading moved manufacturing off its low point for 2012 in November.” – ISM Report Dec 2012

ISMDec2012

A closer reading however notes that “The nine industries reporting contraction in December — listed in order — are: Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Fabricated Metal Products; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; and Apparel, Leather & Allied Products.”ISM Report Dec 2012

Precision machining is an industry of Fabricated Metal Products.  Four of our most important market segments were also in decline in December:  Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components. The market we see is not as rosy as the headline.

In addition, the New Orders component of the survey, at 50.3, went unchanged.  This suggests that new orders, the source of our business’s future production, was virtually unchanged in December. The backlog of orders component,  at 48.5,indicates a small contraction of the orders book.

Graph courtesy of Calculated Risk Blog

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