U.S. ISM Manufacturing Index (December 2020)

Sohaib Shahid, PhD, Senior Economist | 416-982-2556

Date Published: January 5, 2021

Share this:

Manufacturing ends the year on a high note

  • The December ISM manufacturing index climbed to 60.7, higher than market expectations of 56.6. This marked a 3.2 percentage points increase from the November print of 57.5.
  • New orders increased by 2.8 percentage points to 67.9, while new export orders decreased by 0.3 percentage points to 57.5. The backlog of orders sub-index came at 59.1, an increase of 2.2 percentage points compared to November. 
  • Consumption – measured by production and employment sub-indices – contributed positively. Put together, the production (+4.0) and employment (+3.1) sub-indices saw a 7.1 percentage points increase.
  • The supplier deliveries sub-index rose to 67.6 from 61.7 in December. The sub-index continues to reflect difficulties in maintaining delivery rates due to challenges in transportation and supplier labor markets. 
  • Of the 18 manufacturing industries, 16 reported growth in November. The two industries reporting contraction were: Printing & Related Support Activities and Nonmetallic Mineral Products. 

Key Implications

  • The manufacturing sector expanded at its fastest pace of the year in December, with the overall economy registering an eighth consecutive month of growth. The expansion was seen across the board, with demand, consumption and inputs registering strong growth compared to November.
  • While the sector continues to recover, it is underperforming its potential. We expect this underperformance to continue in the near-term, as "labor market difficulties at panelists' companies and their suppliers will continue to restrict the manufacturing economy expansion until the coronavirus crisis ends".
  • Despite the new spending package, several hurdles lie in the way of recovery. These include a slower-than-expected vaccine rollout, surging hospitalization rates, relatively high unemployment and cutbacks in business investment. While overall sentiment improved in December, it remains fragile and susceptible to rising new cases and renewed restrictions in some U.S. jurisdictions. 

Disclaimer