ISM index increases as manufacturing staffing picks up

01.03.2012


A monthly index released by the Institute for Supply Management (ISM) rose to its highest point in six months in December as manufacturing staffing picked up amid rising hiring.

A report released by the ISM indicated that the organization's monthly manufacturing index, called the PMI, increased to 53.9 in December from its November reading of 52.7. Readings that exceed 50 generally denote expansion in the sector, while readings below 50 generally signify contraction. December marked the 31st consecutive month of increases in the index.

The results of the report exceeded the estimates of economists polled by various media outlets. Economists participating in a MarketWatch poll predicted that the PMI would rise to 53.0, while market experts participating in a Bloomberg News survey estimated that the manufacturing index would increase to 53.5. A total of 74 economists participated in the Bloomberg survey, and their predictions were as low as 50 and as high as 56.

"It's a pretty decent report overall," Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, told Reuters. "We're not roaring ahead here, but it's also not collapsing. That's consistent with our overall view of the economy in 2012."

Porcelli told Bloomberg that "global economic activity is showing signs of life."

He added that "manufacturing in the early part of the year will keep expanding. It’s good to know that purchasing managers are feeling a bit better about the economic backdrop."

The Associated Press reports that factories increased hiring in December and responded to the largest increase in new orders since April. Data provided by the Commerce Department indicated that expenditure for construction projects gained 1.2 percent in November, which was the largest monthly gain since the 2.2 percent increase in August. This spending reached an annually adjusted rate of $807.1 billion, which is still below the rate of $1.5 trillion that economists consider to be healthy for the industry, according to the media outlet. The increased expenditure could trigger construction staffing.

A Bloomberg survey indicated that economists predict that factory payrolls increased by 5,000 in December after gaining 2,000 in November. These estimates were made ahead of the December jobs report, which will be released on January 6.

The increase in new orders that factories will need to fill and the hiring that these facilities will do could serve to spur manufacturing staffing.