Economic activity in the manufacturing sector surged in December amid the eighth consecutive month of economic growth, according to a recent Institute for Supply Management (ISM) report.
The ISM’s monthly manufacturing index, which measures the overall health of the manufacturing sector, rose to 60.7% in December according to the ISM Report On Business issued Tuesday. The figure is the highest recorded since August 2018 and an increase of 3.2 points from November.
For U.S. factories, 2020 finished with a flourish: The December #Manufacturing @ISM® Report On Business® was at 60.7%, with strength in new orders and production, a big change in commodities prices and #employment returning to expansion. https://t.co/AoPxHU6BO9 #economy #ISMPMI
— Institute for Supply Management (@ism) January 5, 2021
The Purchasing Managers Index (PMI) compiled by the ISM is based on a monthly survey of senior executives at more than 400 companies across 19 industries. The index is scored based on new orders, inventory levels, production, supplier deliveries and employment.
An index score of at least 50% indicates economic expansion in the manufacturing sector. An initial polling of economists had previously suggested a slightly lower 56.6% index score, according to Reuters.
“Manufacturing performed well for the seventh straight month, with demand, consumption and inputs registering strong growth compared to November,” ISM chairman Timothy Fiore stated in the report. “Labor market difficulties at panelists’ companies and their suppliers will continue to restrict the manufacturing economy expansion until the coronavirus (COVID-19) crisis ends.”
The positive numbers point to a relatively healthy economic rebound after manufacturing output dipped during the early months of the ongoing coronavirus pandemic.
A report earlier this year by the Federal Reserve found that manufacturing declined 13.7% in April as factories across the country slowed down or halted production due to coronavirus restrictions. Employment in the manufacturing sector also dipped earlier this year but has steadily grown since June, according to Federal Reserve economic data. (RELATED: Thanking The Unsung Heroes)
PMI survey respondents say a resurgence in manufacturing activity has not completely offset economic difficulties created by the pandemic. While some industry partners reported an increase in sales during the second half of 2020, according to the report, others noted that shutdowns, customer restrictions and personnel issues will continue to impact the sector.
Federal Reserve data shows manufacturing output is still around 3.8% lower than its pre-pandemic level, Reuters reported. Rising coronavirus cases could continue to create disruptions in the manufacturing sector.