The manufacturing sector continued to grow in December, but at a slightly lower rate compared to November, according to data released by the Institute for Supply Management on Tuesday.
The data, taken before the full effect of the omicron variant was felt, pointed to the same big picture of healthy demand being hampered by supply chain bottlenecks that somewhat worsened in December after showing slight improvement in November.
The headline purchasing managers’ index inched down to 58.7 in December from 61.1, marking the 19th consecutive month of expansion. An index above 43.1 indicates overall growth.
Demand for manufactured goods also moderated in December as the subindexes for production and new orders both declined—to 59.2 from 61.5 and to 60.4 from 61.5, respectively.
Still, demand continued to expand in December while supply remained constrained as both the subindexes for supplier deliveries and inventories dropped on the month.
The gap between demand and supply caused a backlog of orders to increase as the subindex for backlogs increased to 62.8 from 61.9.
On a brighter note, both employment and prices improved for the manufacturing sector as the subindex for employment grew for the fourth straight month, and the subindex for prices paid plunged to 68.2 from 82.4 in December. While prices remained elevated, the subindex was at its lowest point since December 2020, showing signs of price pressures easing.
Despite a softer growth rate, the manufacturing sector continued to rebound strongly since the pandemic first hit in 2020. We expect the sector to grow further as demand stays healthy and supply chain bottlenecks ease.