The nation’s manufacturing sector expanded in December to the market’s surprise, reversing the previous month’s contraction.
The Associated Press reported that the Institute for Supply Management (ISM) said Wednesday (Jan. 3) its manufacturing index registered 51.4 in December, compared with 49.5 in November, which was the first time the sector’s activity shrank since April 2003. A reading below 50 indicates contraction, while above 50 signals expansion.
December’s index came in above the average analyst expectation for a reading of 50, or no change in the sector’s output.
The manufacturing sector had grown for 41 consecutive months prior to November, but falling home prices, high energy prices and other factors conspired to reduce industrial activity that month.
Norbert J. Ore, chair of the ISM, said the sector proved “resilient” in December because of an increase in new orders and a decrease in inflationary pressure that brought down prices.
David Resler, chief economist at Nomura Securities in New York, said that despite the improvement over November’s data, growth in the sector does not by any means appear robust.
“The trend is still worrisome,” Resler said, adding that manufacturing output is still “well below the norms of the recent past.”
Indeed, the ISM report said that employment in the manufacturing sector fell in December but at a slower rate, with a 49.7 reading compared with 49.2 in November.
But the new orders index rose substantially to 52.1, compared with 48.7 in November. And prices manufacturers paid for materials decreased to 47.5 from 53.5 a month earlier. The production index increased to 51.8, compared with 48.5 in November.