December 2010 ISM Reports

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With a 0.4 percentage point increase (to 57.0 percent) in its PMI, manufacturing expanded at a slightly faster pace in December, according to the Institute for Supply Management (ISM). "The manufacturing sector continued its growth trend as indicated by this month's report. We saw significant recovery for much of the U.S. manufacturing sector in 2010,” said Norbert Ore, chair of ISM’s Manufacturing Business Survey Committee. "The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle. Additionally, manufacturers that export have benefitted from both global demand and the weaker dollar. December's strong readings in new orders and production, combined with positive comments from the panel, should create momentum as we go into the first quarter of 2011."

Wood Products reported no change again in December, while the only real bright spots for Paper Products involved rising employment, lower inventories and slowing imports.
 

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The pace of growth of the non-manufacturing sector also picked up in December, thanks to a 2.1 percentage point (to 55.0 percent) increase in its NMI/PMI -- the strongest reading since May 2006. Real Estate and Construction both shared in that expansion while Ag & Forestry contracted.

There were two disturbing aspects of both reports: First, employment grew at a slower pace in both sectors. Second, input prices increased noticeably. Price indices rose 3.0 percentage points for manufacturers and 6.8 percent for service industries; service-industry costs are now at their highest level since September 2008. Fuel, transportation costs, paper and caustic soda were among the relevant commodities up in price; no relevant commodity were down in price. Coated groundwood was described as in short supply.