Economic activity in the U.S. manufacturing sector grew in December for the 19th consecutive month while the overall economy grew for the 38th consecutive month, according to a report from the Institute of Supply Management (ISM).
Comments from respondents focused on inflation, margins, and seasonal issues. While many manufacturers are enjoying strong sales, there is concern that inflation is taking its toll on margins and reducing profits. While energy and basic commodities are the drivers behind the higher prices, the responses show signs of a peak in some commodities.
ISM's Purchasing Managers' Index registered 58.6 percent in December, an increase of 0.8 percent compared to 57.8 percent in November. ISM's New Orders Index rose 5.9 percent in December to 67.4 from 61.5 percent in November.
ISM's Production Index decreased 0.1 percent to 56.9 from 57 percent in November. The ISM Employment Index is at 52.7 percent for December, a decrease of 4.9 percent compared to 57.6 percent in November.
"December's PMI, driven by a significant increase in the New Orders Index, is very encouraging as growth has accelerated for the second consecutive month," said Norbert J. Ore, C.P.M., chair of the ISM Manufacturing Business Survey Committee. "This completes a strong year for manufacturing based on the ISM data, as the overall index averaged above 60 percent for 2004. While there is continuing upward pressure on prices, the rate of increase is slowing and definitely trending in the right direction."
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