Today's Report (01/04/2022)

Economic activity in the manufacturing sector grew in December, with the overall economy achieving a 19th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The December manufacturing PMI was 58.7%, a 2.4 percentage point decrease from the November reading of 61.1%. This figure indicates that the overall economy is expanding for the 19th month in a row, following a contraction in April 2020. The New Orders Index was 60.4% in December, down 1.1 percentage points from the previous month's reading of 61.5%. The Production Index was 59.2% in December, down 2.3 percentage points from the previous month's reading of 61.5%. The Prices Index was 68.2%, a 14.2 percentage point decrease from the previous month's figure of 82.4%. The Backlog of Orders Index was 62.8% in December, 0.9 percentage points higher than the previous month's reading of 61.9%. The Employment Index was 54.2%, 0.9 percentage point higher than the previous month's reading of 53.3%. The Supplier Deliveries Index was 64.9% in December, down 7.3 percentage points from the previous month's figure of 72.2%. The Inventories Index was 54.7% in December, 2.1 percentage points lower than the previous month's reading of 56.8%. The New Export Orders Index was 53.6% in December, a 0.4 percentage point decrease from the previous month's reading of 54%. The Imports Index was 53.8%, up 1.2 percentage points from the previous month's reading of 52.6%.


US ISM Manufacturing PMI

What is it?

It is the first monthly report on the economy with a focus on manufacturing.

What are the fundamental effects?

If there is a pickup in demand for manufactured goods, purchasing managers quickly respond by increasing orders for production materials and other supplies. If manufacturing sales slow, these corporate buys will cut back on their industrial order. It is an effective gauge for turning points in the business cycle and has a close link with GDP. A reading above 50 is believed to be consistent with GDP growth of 2.5%. Every full point in the index above 50 can add 0.3 percentage points or so growth over the year.

How does it affect the markets?

CURRENCY - The dollar may bounce higher with a PMI above 50.

STOCKS - Equity markets prefer lower interest rates and could rally with the bond market.

BONDS - The bond market will rally when the ISM manufacturing index is weaker than expected.

US ISM Manufacturing Prices What Is It?

It reflects a change in prices paid by industry representatives for the products or services they receive.

US ISM Mfg. Employment Index, What Is It?

The employment subcomponent is a diffusion index relating to corporate hiring plans. A reading above fifty suggests the net, manufacturing companies are planning to add labor. While a reading below fifty suggests that more manufacturing companies are looking to reduce labor. The employment sub-index accounts for 20% of the overall ISM manufacturing Index.

US ISM Mfg. New Orders, What Is It?

It reflects a change in new orders of industrial companies.