ISM report sharpens focus on manufacturing slump

Index hits 32.4; lowest level since 1948. Chinese manufacturing lags as well

By Plant Engineering Staff January 5, 2009

The Institute for Supply Management’s monthly Manufacturing Business Survey hit its lowest level in more than 50 years, and institute officials are pointing toward historic lows for the index, seen as a barometer of manufacturing strength.

The ISM report saw the manufacturing index fall to 32.4 in December, down from 36.2 in November. An index of 50 shows economic growth.

“Manufacturing activity continued to decline at a rapid rate during the month of December. The decline covers the full breadth of manufacturing industries, as none of the industries in the sector report growth at this time,” said Norbert J. Ore, chair of the Institute for Supply Management Manufacturing Business Survey committee. “New orders have contracted for 13 consecutive months, and are at the lowest level on record going back to January 1948. Order backlogs have fallen to the lowest level since ISM began tracking the Backlog of Orders Index in January 1993. Manufacturers are reducing inventories and shutting down capacity to offset the slower rate of activity.”

The news was no better for China’s manufacturing . The Purchasing Managers Index in China in December was up to 41.2 from November’s 38.8, but as in the U./S., a number below 50 indicates manufacturing decline. China’s economy continues to lag behind growth figures in 2007.