U.S. Manufacturing Stalls In December

Decline in a closely watched index points to a manufacturing recession that some analysts expect will lead to a general business recession in 2008.

TEMPE, Ariz. β€” Manufacturing activity failed to expand in December, according to the Institute for Supply Management (ISM).
β€œThe manufacturing sector failed to grow in December, ending 10 consecutive months of growth. The recent trend has been toward slower growth,” said Norbert J. Ore, chair of the ISM Manufacturing Business Survey Committee. β€œHowever, December was apparently a very tough month as New Orders, Production and Employment were all below the break-even mark of 50 percent. Industries close to the housing market appear to be struggling more than others, and those involved with exports seem to be doing better.”
For December, the PMI registered 47.7 percent, down 3.1 points from November. A reading above 50 signals the manufacturing economy is expanding, while a reading below 50 signals a contraction.
New orders fell 6.9 points to 45.7. Production fell 4.6 points to 47.3 percent.
At 48 percent, the Employment Index was up 0.2 from November.
Inventories contracted again in December, dropping 1.4 points to 45.5.
The Prices Index was at 68 percent, indicating that manufacturers are paying higher prices compared to November.
Backlog of orders contracted for the third consecutive month, registering 43 percent in December.
New export orders dropped 6 points to 52.5 percent. Imports contracted for the third month, registering 48 percent in December.
β€œThe December ISM index confirms our view that manufacturing activity is declining and that manufacturing industrial production declined in fourth quarter 2007 from its level in the previous quarter,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. β€œA manufacturing recession has begun and we feel it is the precursor to a general business recession in the first half of 2008. The housing collapse, decline in motor vehicle output, record high oil prices, the credit crunch, and declining housing prices are enough economic shocks to bring any economic cycle to a halt. The most disturbing aspect to the December ISM report, though, is that the export index indicates much slower growth in exports. It is the net foreign trade (exports less imports) improvement that economists hope will cushion the economic downturn.”
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