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ISM Manufacturing Index Slows But Still Registers 19th Consecutive Month of Expansion 

The December ISM manufacturing index fell to 58.7, missing market expectations for 60.0. This marked a 2.4 percentage point decrease from the November reading of 61.1.

New orders fell by 1.1 percentage points to 60.4, while new export orders decreased by 0.4 percentage points to 53.6.

The backlog of orders sub-index came in at 62.8, rising 0.9 percentage points from November’s 61.9 print.

The production index pulled back to 59.2 (from 61.5 in November), while the employment index rose 0.9 points to 54.2.

The supplier deliveries sub-index fell to 64.9 points from 72.2 in November. The sub-index continues to reflect difficulties in meeting orders in a timely manner, but has managed two consecutive months of decline. The inventories sub-index registered 54.7 in December recording its fifth consecutive month of expansion.

Fifteen of 18 manufacturing industries reported growth in November. Growth was led by Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Chemical Products.

Key Implications

The manufacturing sector may have missed expectations, but December still registered another month of expansion. Despite persistent supply chain issues, healthy consumer demand has kept the sector buzzing with activity.

As the year rolls over, the start of 2022 could hold a setback for some of the improving supply conditions from late-2021. The explosive spread of the Omicron COVID variant threatens to further strain labor and input availability. Moreover, as consumers modify their behavior in response to the spreading virus, shifting spending away from services and back to goods, producers will have their hands full meeting demand. These factors could further delay the supply chain relief we have been anticipating and prolong the resultant inflationary impulse.

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