January 3, 2007 – The ISM diffusion index of U.S. manufacturing activity rose by 1.9 index points to 51.4 in December, roughly reversing November’s decrease (Chart 1).
This index had fallen for four straight months through November (a sign of slowing growth). In November, it crossed the breakeven point (an index level of 50) to signal a decline in manufacturing activity for the first time since April 2003.
December’s small increase brought the ISM manufacturing activity index back into slow growth territory (Chart 2). Thus, these data fail to reinforce fears of a worsening downturn in the manufacturing sector.
The ISM new order index rose by 3.4 index points to 52.1 in December, and the production index rose by 3.3 index points to 51.8. Like the total activity index, both new orders and production essentially reversed their November declines in December.
The ISM input price index fell by 6 index points to 47.5 in December, roughly reversing November’s increase (Chart 3). After fourteen straight months in a range consistent with exceptionally strong growth, this index has now signaled falling manufacturing input prices for two of the last three months.
The ISM employment index edged up 0.5 index points to 49.7 in December – indicating little or no change in manufacturing employment (Chart 4).