U.S. Manufacturing Sector Slowed in December as Supply-Chain Disruptions Eased -- ISM

By Xavier Fontdegloria

U.S. factory activity continued to expand solidly in December, albeit at the slowest pace since January as goods producers reported a further easing of supply-chain disruptions, data from a purchasing managers survey for the sector showed Tuesday.

The ISM Manufacturing Report on Business PMI decreased to 58.7 in December from 61.1 in November, according to the Institute for Supply Management. A reading above 50 indicates expansion, while a result below that signals contraction.

Economists polled by The Wall Street Journal expected the indicator to come in at 60.0.

Factories across the U.S. are humming on strong demand for goods, but severe supply-chain bottlenecks continue to hamper the procurement of inputs and constrain production.

In December, the U.S. manufacturing sector remained in a demand-driven, supply chain-constrained environment, but there were indications of improvements in labor resources and supplier-delivery performance, said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.

Demand for goods remained strong, with the new orders index falling slightly to 60.4 from 61.5 the previous month, and the customers' inventories index increasing to 31.7 from 25.1.

The production index dropped to 59.2 in December from 61.5 in November, while the employment index rose to 54.2 from 53.3.

"For the second month in a row ... panelists' comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover," Mr. Fiore said.

The survey showed additional signs that supply-chain problems that have been hitting factory output for months could be improving.

The supplier deliveries index fell to 64.9 from 72.2, the backlog of orders index remained at a high 62.8. The inventories index edged down to 54.7 from 56.8, the data showed.

"Transportation networks, a harbinger of future supplier-delivery performance, are still performing erratically; however, there are signs of improvement," Mr. Fiore said.

The prices index fell sharply to 68.2 from 82.4 the previous month, signaling that prices continued to increase, albeit at a slower pace compared with November.

"Price increases appear to be slowing. Lead times are shrinking slowly, and inventories are growing," said one of the respondents from the fabricated metal products sector.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

01-04-22 1039ET