MAPI Analysis on ISM Index: Factory Downturn Intensifies
The following is an analysis from Cliff Waldman, Economist for the Manufacturers Alliance/MAPI, regarding the Institute for Supply Management (ISM) report for December 2008.
“The December manufacturing report from the Institute for Supply Management suggests that the factory sector downturn, which is now global in scope, is reaching historic dimensions in the U.S.,” Waldman said. “The widely-followed Purchasing Managers’ Index continued its post-August 2008 plunge to reach the lowest level since January 1980. Demand has all but evaporated as shown by 13 consecutive monthly declines in the new orders component to the weakest reading in the history of the data, which extend back to January 1948. Unsurprisingly, no industries reported production growth during the month of December and the persistently falling backlog index suggests that the near-term outlook for production is bleak.
“Recovery prospects for the U.S. factory sector are now tied to the development and implementation of new monetary and fiscal policies in the U.S. and around the world,” he added. “Absent strong and effective policy stimulus, manufacturing demand is unlikely to recover on its own.”