Though just below expectations and not nearly as robust as the more volatile Chicago PMI, today’s number shows that manufacturing continues to expand at a healthy clip and impressive gains in production and new orders suggest further improvement early next year.
In its press release, the ISM noted, "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."
Manufacturing has been and continues to be a bright spot in a tepid recovery that began in the middle of 2009. The service sector, which makes up the bulk of economic activity, has lagged as the chart below indicates, though the sector has been expanding for about a year. Wednesday’s release is expected to show another increase.
Recently, the bulk of economic indicators suggest that growth is accelerating, including today’s manufacturing report, a dip in weekly jobless claims below 400,000, recent gains in the Leading Economic Index and the strengthening stock market.
In addition, the just-extended Bush tax cuts, coupled with a partial payroll tax holiday, should aid the economy in the coming months.
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