December Institute for Supply Management

According to the Institute for Supply Management, the U.S. economy continued to expand in December. The pace of growth appears to have slowed in both the manufacturing and non-manufacturing portions of the economy, but their impressive string of consecutive months of growth remains intact. The production portion of the economy’s reading was 57.0 versus 57.3 in November. Services slowed to 53.0 from 53.9 in the prior period.

Despite the slight slowdown, manufacturing remained healthy in December. The minor downtick put this indicator at its second best reading of the recover. Only November 2013 has been better since this indicator turned positive 55 months ago. New orders, considered a leading indicator because they will likely turn into actual output, improved to 64.2. Its 0.6 increase puts this important subcomponent at its best level since April 2010 when the count was 65.1.

Non-manufacturing growth continued for the 48th consecutive month. However, the underlying components were mixed. Employment grew at a faster pace in the period, and has now grown in each of the last 17 months. Business activity grew at a slower pace. New orders contracted for the first time since July 2009 which was the month after the Great Recession ended. This may put additional pressure on business activity in the months ahead.

Overall the economy seems to have expanded in the period. This indicator, along with the Chicago Fed National Activity Index, points to continued improvement in overall economic output in the final month of 2013. This does not mean the fragility of the economy has been removed, but in the context of America’s tepid recovery, these indicators are encouraging. (by C. Cox)