MAPI Analysis on ISM Index: Report ‘Very Encouraging’

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the Institute for Supply Management (ISM) index for December 2011:

"The Institute for Supply Management (ISM) reports that its index for manufacturing was 53.9 in December, an improvement from 52.7 the previous month,” Meckstroth said. “A number above 50 indicates growth, and generally the larger the number, the faster the pace of the gains.  The December report on manufacturing is very encouraging.  In the last 25 years, the ISM index averaged 52.4, and thus December’s 53.9 index is well above average; it showed advances in nearly all the major components—particularly in production, employment, and backlogs.  The only negative aspect to the report is that imports improved faster than exports. 

“The first report on manufacturing activity for the month of December should ease fears that the economy is slipping back into recession,” he added, “as a recession would show up first in manufacturing activity, and this is not the case. That said, we expect only a modest pace of growth in manufacturing production in 2012.  Consumers are constrained by debt and this is restraining the pace of growth.  Business equipment investment, oil country goods and equipment, and motor vehicles should be the growth drivers in 2012.”