This morning saw the release of an impressive reading on the manufacturing sector from ISM’s Manufacturing PMI for the month of December.  For the seventh month in a row, the index was consistent with growth in the manufacturing sector (readings above 50 generally indicate month over month growth). Not only did the ISM’s reading show yet another month of growth but that growth accelerated as the index rose to 60.7 – the highest level since August of 2018.  Prior to that, you would need to go all the way back to January and May of 2004 to find readings as high as this past month.

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Along with one of the highest readings in two decades for the headline index, breadth in the report was very strong.  The only indices to fall were those for Exports and Imports, and even those declines were minor.  Meanwhile, the indices for Production, New Orders, Order Backlogs, and Supplier Deliveries all came in the top decile of readings of their respective histories. To summarize, overall conditions continued to improve with strong demand and production on the rise to meet that demand.  There are some supply issues like low inventories and longer lead times, though and that’s contributing to sharply rising prices.

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The commentary section gives a bit more color into this.  Comments frequently mention that there are supply chain issues due to recent COVID outbreaks. Such issues include logistics and supplier delays, as well as labor shortages.  On the bright side, there are also several mentions that sales have not only gotten back on track but have actually passed levels from prior to COVID.

The data from the report backs up that strength in sales noted in the commentary section.  The New Orders Index rose 2.8 points to 67.9.  That is back up to where the index stood in October which was/is also the highest level since late 2003/early 2004. As New Orders have come in at such a strong pace, order backlogs have continued to rise. The index for Backlog Orders rose to 59.1 in December, the highest level since June of 2018.

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