December Manufacturing Index Review

December was another good month for manufacturing as the economic rebound continues. While the picture is not 100% rosy and industry challenges still exist, manufacturers have many bright spots to consider.

✅ Positives

The most important manufacturing number is the U.S. Institute for Supply Management (ISM) monthly purchasing manager index (PMI). In December, the index increased 1.5% over November’s 58.2% to 59.7%. As any number greater than 50 indicates manufacturing expansion, 59.7 shows very strong industry growth. And, although manufacturing has only been expanding for 16 consecutive months, December marked the 103rd consecutive month of overall economy growth.

Sixteen of the 18 manufacturing industries also continued expansion, leaving only wood products and textile mills contracted from November to December 2017. In addition to the overall PMI, manufacturing sector, and economy, seven of the 10 manufacturing industry indexes also show signs of growth or are increasing.

  • New orders made it to 69.4%, up 5.4% over their 64% reading in November — a 14-year high. In fact, it hasn’t been this high since it reached 70.6% in January 2004, but December’s index indicates the 16th growth month in a row for new orders.
  • Production rose 1.9% to 65.8%, beating November’s 63.9%. Like new orders, manufacturing production has also grown for the 16th consecutive month. In addition, the 65.8% December reading is the highest it’s reached since May 2010’s 66.5%.
  • Employment, although growing more slowly as the index was down 2.7% from 59.7% in November to 57%, marked its 15th continuous month of growth.

Supplier deliveries also increased for the 20th month on a row by 1.4%, from 56.5% in November to 57.9% in December, as did prices for raw materials, creeping up to 69% from 65.5% in November, or a 3.5% change. With ISM report respondents speaking to industry expansion, it is fair to say the manufacturing sector is looking healthy.

❌ Negatives

Although the industry appears to be strengthening, in December, a few indexes were contracting, slowing in their growth, or too low.

  • Supplier deliveries were slowing — as they have been for 20 months straight — but up 1.4% to 57.9% in December compared to 56.5% in November.
  • Inventories also saw a slight increase of 1.5% over November’s 47% to 48.5% in December. This area, while contracting, is nearing the 50% growth mark.
  • Customers’ inventories shrunk by 3.5% from 45.5% in November to December’s 42%, which the ISM considers too low.

With slight growth in two of these three sectors, the only indexes with true negative percentage point changes in December were employment and customers’ inventories. These factors and respondents’ outlooks point toward a strong first quarter for 2018.

????  2018 ramifications

Throughout this year, in fact, manufacturers should continue to see a healthy industry. As December PMI results were recorded before the new tax reform legislation passed, indexes may increase even more rapidly than originally expected as company leaders now have an additional incentive to increase their investments.

Whether you stay on top of the monthly industry numbers or just those in your own manufacturing plant, you can always count on the professionals at Global Electronic Services for your repairs. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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