ISM report show steep drop in manufacturing

Stocks respond with a new year's drop

01/02/2008


Economic activity in the manufacturing sector failed to grow in December following 10 consecutive months of expansion, while the overall economy grew for the 74th consecutive month, according to the latest report from the Institute for Supply Management.

The PMI index used to track manufacturing growth dropped from 47.7%, a decrease of 3.1 percentage points when compared to November's reading of 50.8%. This is the first month that the manufacturing sector has failed to grow since January 2007. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

The ISM report sent stocks tumbling more than 100 points in early trading on Jan. 2.

The report was issued by "The manufacturing sector failed to grow in December ending 10 consecutive months of growth. The recent trend has been toward slower growth,” said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee. “However, December was apparently a very tough month as new orders, production and employment were all below the break-even mark of 50%. Industries close to the housing market appear to be struggling more than others, and those involved in exports seem to be doing better. Slower demand appears to be more of a problem than excessive inventories based on the respondents' comments."

More on the impact of the manufacturing decline can be found here .





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