By Sourcing Journal
Economic activity in the manufacturing sector grew in December, led by apparel manufacturing and including textile mills, U.S. supply executives said in the latest Manufacturing Institute for Supply Management (ISM) Report On Business.
“The December Manufacturing PMI registered 60.7 percent, up 3.2 percentage points from the November reading of 57.5 percent,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said.
A reading above 50 percent indicates that the manufacturing economy is generally expanding. Below 50 percent indicates that it is generally contracting. A Manufacturing PMI above 42.8 percent, over a period of time, generally indicates an expansion of the overall economy, ISM noted.
“The manufacturing economy continued its recovery in December,” Fiore said. “Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential. However, panel sentiment remains optimistic, an improvement compared to November.”
Fiore said supply chains continue to struggle compared to November, contributing moderately to the Manufacturing PMI calculation. The Prices Index jumped dramatically in December, to a level last reached in the summer of 2018, the peak of the last manufacturing expansion cycle.
Of the 18 manufacturing industries, 16 reported growth in December, led by apparel, leather and allied products and including textile mills.
ISM’s New Orders Index registered 67.9 percent in December, an increase of 2.8 percent compared to the 65.1 percent reported in November. This indicates that new orders grew for the seventh consecutive month and the sixth consecutive month above 60 percent.
Of the 18 manufacturing industries, the 13 that reported growth in new orders in December were led by apparel, leather and allied products, while textile mills were among those reporting a decline in new orders.
The Production Index registered 64.8 percent in December, 4 percent above the November reading of 60.8 percent, indicating growth for the seventh consecutive month and the sixth straight month above 60 percent. This is the highest reading since January 2011, when the index registered 65.3 percent.
The 13 industries reporting growth in production during the month were also led by apparel, leather and allied products.
ISM’s Employment Index registered 51.5 percent in December, 3.1 percentage points higher than the November reading of 48.4 percent. Of the 18 manufacturing industries, the eight industries to report employment growth in December were topped by apparel, leather and allied products.
The delivery performance of suppliers to manufacturing organizations was slower in December, as the Supplier Deliveries Index registered 67.6 percent, 5.9 percent higher than the 61.7 percent reported in November.
“Suppliers continue to struggle to deliver, with deliveries slowing at a faster rate compared to November,” Fiore said. “Transportation challenges and challenges in supplier-labor markets are still constraining production growth…The Supplier Deliveries Index reflects the difficulties suppliers continue to experience due to COVID-19 impacts. Supplier labor and transportation constraints are not expected to diminish in the near-to-moderate term due to COVID-19.”
A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. Sixteen industries reported slower supplier deliveries in December, including textile mills.
The Inventories Index registered 51.6 percent in December, 0.4 percent higher than the 51.2 percent reported for November. Inventories grew for a third consecutive month after three months of contraction.
An Inventories Index greater than 44.3 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories.
The eight industries reporting higher inventories in December were led by apparel, leather and allied products and included textile Mills.
The ISM Prices Index registered 77.6 percent, an increase of 12.2 percent from the November reading of 65.4 percent, indicating raw materials prices increased for the seventh consecutive month. The index achieved its highest reading since May 2018, when it registered 79.5 points.
A Prices Index above 52.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials. All 18 industries reported paying increased prices for raw materials in December, led by apparel, leather and allied products and including textile mills.
ISM’s New Export Orders Index registered 57.5 percent in December, a decrease of 0.3 percent compared to November.
The nine industries reporting growth in new export orders in December, with apparel and leather, and textile mills reporting no change in exports.
ISM’s Imports Index was 54.6 percent in December, a decline of 0.5 percent from November.
“Panelists continued to note record breaking backlogs in ports of entry, as well as difficulty in arranging drayage and operating within the domestic transportation market,” Fiore said.
Textile mills were among the four industries reporting a decrease in imports in December.