Wheels of Manufacturing Restarting

Manufacturing is gradually on the upswing, according to the December ISM Manufacturing Index, which rose to 55.9 from November’s 53.6 reading.  A gain to just 54.3 was expected, so the news is encouraging.  In terms of inflation, prices paid climbed to 61.5; an increase to 57.2 was forecast.  This is great news for a sector that saw both the steepest declines in manufacturing and trade inventories since 1949 and the fall of industrial production since 1946.

According to the ISM report, “At 55.9 for December, the index not only surpassed expectations of a rise to 54.3, but also posted its strongest reading since April, 2006.  The gains in the components were broad-based with new orders rising to 65.5 in December from 60.3 in November, marking its strongest reading since December, 2004.  Production rose to 61.8 from November’s 59.9, while the employment component increased to 52.0 from the prior month’s 50.8, marking the third consecutive month in expansionary territory.  We expect the Fed to help both sustain the recovery and heal labor markets by leaving the Fed Funds rate at its current low level until the final quarter of 2010.”