Summary
Earlier today, the Institute for Supply Management reported that its index designed to measure the economy's manufacturing activity came in at a reading of 54.2 in December. This was materially below November's result of 58.1. December saw a sizable decline in the index's price component. Nevertheless, it fell to a level that remains quite high by historical standards, and to a level that continues to show meaningful expansion.
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* ISM's report earlier today showed that its index designed to measure the economy's manufacturing activity ("PMI") fell in December, to 54.2. This compared with a November reading of 58.1.
* In December of 2004, the PMI stood at 57.3, 3.1 points or 5.7% above December 2005.
* The December 2005 result was materially below a consensus forecast that had been looking for something around 57.
(NOTE: Overall index and sub-index readings above 50.0 indicate expansion; readings below 50.0 indicate contraction.)
* The prices-paid component registered an 11-point decline during December, to 63.0. Nevertheless, this remained a high reading historically. Even after incorporating December's decline, this series stood 14.5 points or 29.9% above its recent low of 48.5, set last July.
* During December, three of the PMI's more important components weakened, but remained relatively strong overall. These were new orders, production and employment.
* The supplier deliveries index fell 4.8 points to 53.5. Readings in this component above 50.0 indicate the delivery performance of suppliers to manufacturing organizations was slower. December marked the 30th consecutive month of slower delivers. Coupled with a low customers' inventory value of 48.0, this could be signaling bottlenecks and further upward price pressures.
* Some comments from ISM's "What Respondents Are Saying" section of today's report:
* "Business remains strong into our traditional slow time. This is a big surprise. The reason is the construction economy continues to be strong." (Fabricated Metals).
* "Sales have improved as a result of impending holidays." (Food).
* "Steel prices are staying at the fourth-quarter level at least for the first quarter and possibly the first six months of 2006." (Furniture).
* "Although gas and electricity costs are quite high, we are able to offset these costs by a strong construction market that enables us to maintain a good profit margin." (Primary Metals).
* Over the 12-month period ended December, the overall PMI registered a high of 59.4 (September 2005). Its low of 51.4 was set last May. The 12-month average came in at 55.5, 1.3 points above December's result. The highest reading since January 2003 was 62.8 (occurring in January of 2004), 8.6 points or 15.9% above December's reading.
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INSTITUTE FOR SUPPLY MANAGEMENT PMI INDEX
-- TOTAL INDEX AND PRICE COMPONENT
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Respondents Reporting
Higher, Lower, or
Unchanged Prices
Month/ Overall Price ---------------------
Year Index Index Higher Lower Unch.
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12/05 54.2 63.0 37% 11% 52%
11/05 58.1 74.0 53% 5% 42%
10/05 59.1 84.0 70% 2% 28%
09/05 59.4 78.0 60% 4% 36%
08/05 53.6 62.5 36% 11% 53%
07/05 56.6 48.5 24% 27% 49%
06/05 53.8 50.5 22% 21% 57%
05/05 51.4 58.0 32% 16% 52%
04/05 53.3 71.0 52% 10% 38%
03/05 55.2 73.0 51% 5% 44%
02/05 55.3 65.5 38% 7% 55%
01/05 56.4 69.0 45% 7% 48%
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12/04 57.3 72.0 52% 8% 40%
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11/04 57.6 74.0 55% 7% 38%
10/04 57.5 78.5 61% 4% 35%
09/04 59.1 76.0 55% 3% 42%
08/04 59.6 81.5 67% 4% 29%
07/04 61.6 77.0 58% 4% 38%
06/04 61.2 81.0 66% 4% 30%
05/04 62.6 86.0 74% 2% 24%
04/04 62.3 88.0 77% 1% 22%
03/04 62.3 86.0 73% 1% 26%
02/04 62.1 81.5 65% 2% 33%
01/04 62.8 75.5 54% 3% 43%
==========================================
12/03 62.1 66.0 37% 5% 58%
11/03 61.3 64.0 33% 5% 62%
10/03 57.7 58.5 26% 9% 65%
09/03 55.1 56.0 21% 9% 70%
08/03 55.6 53.0 19% 13% 68%
07/03 52.5 53.0 21% 15% 64%
06/03 50.4 56.5 26% 13% 61%
05/03 49.8 51.5 21% 18% 61%
04/03 46.1 63.5 37% 10% 53%
03/03 46.4 70.0 47% 7% 46%
02/03 49.9 65.5 <------ NA ------>
01/03 52.8 57.5 <------ NA ------>
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Commodities Reported in Short Supply During December:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Caustic Soda (2); Plastics; Resins; and Steel (3).
Commodities Reported Up in Price During December:
Aluminum (5); Aluminum Products; Caustic Soda (20); Chemicals (23); Copper (7); Copper Products; Corrugated Containers (2); Corrugated Packaging; Energy (11); Freight; Gasoline (6); LDPE (2); Natural Gas (41); Natural Rubber; Oil (8); Packaging; Petroleum Products (2); Plastic Resins (11); Plastics (17); Resins* (6); Rubber (2); and Steel (27).
Commodities Reported Down in Price During December:
Diesel Fuel (2) and Resins*.
*Reported up and down in price.
On Thursday (1/5), ISM will release data covering the economy's service-sector activity during December.
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