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A key measure of manufacturing activity slowed in December, according to the ISM® Manufacturing Purchasing Managers’ Index®. NAM Chief Economist Chad Moutray broke it down for us.

The numbers: “Manufacturing activity expanded at the slowest pace in December since January [2021], with supply chain, workforce and price issues weighing heavily on sentiment despite strong demand,” said Moutray. “The ISM® Manufacturing Purchasing Managers’ Index® declined from 61.1 in November to 58.7 in December, with eased growth for both new orders (down from 61.5 to 60.4) and production (down from 61.5 to 59.2). Encouragingly, employment (up from 53.3 to 54.2) improved to the best reading since April.”

Supply chain lags: “Indices for the backlog of orders (up from 61.9 to 62.8), supplier delivery times (down 72.2 to 64.9) and customers’ inventories (up from 25.1 to 31.7) were consistent with still-significant bottlenecks in the sector, even with some progress in the latter two for the month,” said Moutray.

Costs fall: “Cost pressures decelerated notably in December but remained highly elevated, with the index for prices declining 82.4 to 68.2,” said Moutray. “This measure peaked at 92.1 in June, when price growth was the fastest since July 1979, and the sample comments note some slowing for the month. Yet, inflation remained the number-one concern in the most recent NAM Manufacturers’ Outlook Survey.”

In related news: The Job Openings and Labor Turnover Survey showed the number of job openings in the manufacturing industry remaining high.  

• Openings stay open: “There were 858,000 manufacturing job openings in November, down from a record 955,000 in October,” said Moutray. “While the pace of job postings decelerated somewhat, it was the eighth straight month with openings that have exceeded 800,000, averaging 887,000 over that time frame. In November, both durable (down from 552,000 to 522,000) and nondurable (down from 402,000 to 336,000) goods firms pulled back from record paces in the previous month but remained elevated.”
• The bottom line: “Overall, job postings remain well above pre-pandemic levels, as companies ramp up activity and need more workers to meet the additional capacity,” said Moutray. “Of particular note, 85.2% of respondents to the latest NAM Manufacturers’ Outlook Survey said that they had open positions that they were unable to fill, and nearly 45% noted that their companies were unable to take on new business and had lost revenue opportunities.”