ISM report: Is manufacturing slowdown over?

By Plant Engineering Staff January 5, 2007

Wednesday’s Institute for Supply Management report on manufacturing that showed industrial activity rebounded above the 50-point benchmark to 51.4 in December is, “welcome news to manufacturers and begins to validate our 2007 economic forecast,” said David Huether, chief economist for the National Association of Manufacturers .

“After falling for four consecutive months, the return above 50 is an early indication that the slowdown in the manufacturing expansion may be coming to an end,” he said.

The December upturn was driven by accelerations in both production and new orders, which showed their first increases in five and six months respectively.

“While (the) report is encouraging, the current level of manufacturing activity remains consistent with a pace that is slower than that of the first three quarters of 2006, when the manufacturing sector grew at an average annual rate of over 5%,” Huether said.

“In the months ahead, I expect the ISM will rebound moderately,” he continued. “However, the continued slowdown in housing and a deceleration in business investment spending will translate into more moderate growth in manufacturing going forward.

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