ISM Manufacturing Index

ISM Manufacturing Index:  The Institute of Supply Management’s Index moved up 3.2 points on the month (m/m) to 60.7 for December 2020; this value is stronger than the forecast of 50.  The index has been higher than 55 for five consecutive months (expansion = 50+). The new orders sub-index scored a 67.9. Overall, the ISM manufacturing index is strong, while fundamentals remain unfavorable as the global economy weakens.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 20 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 is contracting and greater than 50 is expansionary.

Figure 1 breaks down the detail of the composite index and sub-indexes. The composite index score for December was 60.7. One year ago, the composite index was strong at 47.2.

Of the 18 manufacturing industries, 16 reported growth in December, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Wood Products; Fabricated Metal Products; Machinery; Computer & Electronic Products; Transportation Equipment; Plastics & Rubber Products; Paper Products; Chemical Products; Petroleum & Coal Products; Primary Metals; Textile Mills; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The two industries reporting contraction in December are: Printing & Related Support Activities; and Nonmetallic Mineral Products.

An Institute for Supply Management respondent stated, “Current business outlook is strong through the first quarter of 2021. We are anticipating 20 percent growth in sales for 2021.” (Fabricated Metal Products)

At Gerdau we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength as well as a window on the likely short-run future of US manufacturing.

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