“We are anticipating 20 percent growth in sales for 2021.”
U.S. manufacturing activity surged to a two-year high in December, according to the Institute for Supply Management’s monthly Report on Business. According to the ISM, industrial activity rose 3.2% in December to a rate of 60.7% -- its highest reading since August 2018. Any reading over 50 indicates expansion.
New orders, production and employment all posted strong gains in December, with production hitting a ten-year high. Both imports and exports continued to grow, while prices increased, and backlog grew.
Optimism among manufacturing executives has hit its strongest level since the pandemic, with 3 positive comments registered for every cautious comment.
Said Timothy Fiore, Chairman of the ISM: “The manufacturing economy continued its recovery in December. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential.”
One executive in the electrical equipment, appliances & components industry stated, “Business is stronger than expected, with higher demand for many products. Volatility continues due to the very persistent pandemic and associated risks.”
Of eighteen industries, sixteen reported growth in December. Growth was led by apparel, leather & allied products; furniture & related products; wood products; fabricated metals products and machinery.
Printing and related support activities and non-metallic mineral products were the only two industries to post contraction.
New Orders Surge
The New Orders Index, which has generally been surging during the recovery, notched up 2.8% in December to a reading of 65.1%.
One respondent on the miscellaneous manufacturing sector reported: “Sales are now exceeding pre-COVID-19 levels, but uncertainty remains through the winter months while COVID-19 is still rampant.”
Related: COVID-19’s Impact on the Reshoring Movement
Another respondent in the Electrical Equipment, Appliances & Components sector reported “Business is stronger than expected, with higher demand for many products. Volatility continues due to the very persistent pandemic and associated risks.”
Thirteen of eighteen industries reported an uptick in new orders for December, led by apparel, leather & allied products; wood products; furniture & related products and petroleum & coal products.
Declines in new orders were seen in nonmetallic mineral products; textile mills and miscellaneous manufacturing.
Manufacturing Production Soars
The ISM’s Production Index surged 4% in December to a reading of 64.8%. December’s reading represents a seventh straight month of growth for manufacturing production and is the highest reading since January of 2011.
Thirteen of eighteen industries reported growth in output, led by apparel, leather & allied; printing & related support activities; wood products; and furniture & related products.
Employment Leaps Back into Expansion
The ISM employment index has seen its ups and downs this year, with hiring lagging behind other key metrics. However, in December, the employment index rose back into expansion, climbing 3.1% to a reading of 51.5%. Remarkably, this is 24 points higher than the index’s low of 27.5% in April. However, manufacturers are still struggling with labor shortages and coronavirus-related employment issues.
Related: Job Openings in Manufacturing Hit All-Time High
Said one respondent in the food, beverage & tobacco products industry, “COVID-19 is affecting us more strongly now than back in March. Vendors/service suppliers unable to maintain levels of service due to employee shortages. Logistic issues also hurting us due to coronavirus-related problems.”
Another in the plastics & rubber products industry stated “Suppliers are having difficulty finding and retaining labor leading to supply constraints.”
Just eight of eighteen industries reported employment growth in December, led by apparel, leather & allied products; furniture & related products, primary metals, miscellaneous manufacturing and fabricated metal products.
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