December ISM Manufacturing Index: Slight Improvement in Labor Resources & Supplier Delivery

This morning the Institute for Supply Management published its monthly Manufacturing Report for December. The latest headline Purchasing Managers Index (PMI) was 58.7, a decrease of 2.4 from 61.1 the previous month and in expansion territory. Today's headline number was below the Investing.com forecast of 60.0.

Here is the key analysis from the report:

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

Fiore continues, “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with indications of improvements in labor resources and supplier delivery performance. Shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products continue to plague reliable consumption. Coronavirus pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, employee turnover and overseas supply chain problems — continue to impact manufacturing. However, panel sentiment remains strongly optimistic, with six positive growth comments for every cautious comment, down slightly from November. ISM’s Semiannual Economic Forecast, released in December, indicates a strong 2022 performance expectation in terms of revenue growth and profitability. Demand expanded, with the (1) New Orders Index growing, supported by continued expansion of new export orders, (2) Customers’ Inventories Index remaining at a very low level and (3) Backlog of Orders Index staying at a very high level. Consumption (measured by the Production and Employment indexes) grew during the period, with a combined negative 1.4-percentage point change to the Manufacturing PMI® calculation. The Employment Index expanded for a fourth straight month, with some indications that ability to hire is improving, though somewhat offset by the continued challenges of turnover and backfilling. Inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion, but there are clear signs of improved delivery performance. The Supplier Deliveries Index again slowed while the Inventories Index expanded, both at a slower rate. In December, the Prices Index increased for the 19th consecutive month, at a slower rate (a decrease of 14.2 percentage points), indicating that supplier pricing power continues to rise, but to a lesser degree. See report