ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved down 2.4 points month on month (m/m) to 58.7 for December 2021; this value is stronger than the forecast of 50.  The new orders sub-index scored a 60.4. Overall, the ISM manufacturing index is strong, while the global economy is beginning to strengthen again following shutdowns throughout Covid-19.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 62.8 this month, while the inventories sub-index was 54.7.

The 15 manufacturing industries reporting growth in December — in the following order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Primary Metals; and Petroleum & Coal Products. The three industries reporting a decrease in December compared to November are: Wood Products; Printing & Related Support Activities; and Paper Products.

“Price increases appear to be slowing. Lead times are shrinking slowly, and inventories are growing. I hope we have reached the top of the hill to start down a gentle slope that lets us get back to something that resembles normal.” [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 U.S. manufacturing.