New York, NY, Jan. 2--Manufacturing activity expanded strongly in December, the first growth in four months, but it is unclear if that momentum can be sustained, according to the Institiute for Supply Management.
The Tempe, Arizona based institute's index of business activity was 54.7 in December, a marked improvement from the 49.2 reading in November. A reading above 50 signals the manufacturing sector is growing; a reading below 50 suggests the sector is contracting.
Analysts had forecast a reading of 50.1 for the month. The last time the index was above 50 was in August.
"The manufacturing sector rebounded in December," said Norbert J. Ore, who oversees the monthly survey for the group, formerly known as the National Association of Purchasing Management. "The question at this point is whether the manufacturing sector can continue to gather momentum during the first quarter of 2003."
Ore said the index offers some positive signs for manufacturers as they enter the new year, but that the sudden jump in activity remains difficult to explain.
Some of the purchasing and supply executives surveyed by ISM reported an increase in new orders for their products during December. But a number still see little if any rebound, and the uncertainty of a war with Iraq appears to be holding back business, ISM said.
The index was pushed higher in large part by surge in new orders, and a somewhat less robust increase in production.
Of the 20 industries surveyed by ISM, 11 reported growth including food, leather, instruments and photographic equipment, and printing and publishing.
The ISM report is closely followed by economists because it offers an early reading on the health of the manufacturing sector. Its index is based on a survey of executives who buy the raw materials for manufacturing at more than 350 companies.
