Manufacturing Falls to 28-Year Low
U.S. manufacturing fell sharply in December and reports from abroad showed the same for plants in Europe and Asia, as businesses cut production and slashed product orders in response to the global recession.
The Institute for Supply Management's index of industrial production slipped by 3.8 percentage points in December compared with the month before, to the lowest level since 1980.
The private group's survey of purchasing executives provides a rough guide to whether manufacturing companies are expanding output and receiving increased numbers of orders, or seeing their business decline. The index for December stood at 32.4, compared with 36.2 in November. An index above 50 indicates that manufacturing activity is expanding, while a reading below 50 indicates a decline.
It is the fifth consecutive month that the group's measure of industrial production has stalled, a result consistent with declining consumer demand and economic weakness throughout the United States.
The decline was both deep and broad, the ISM reported: None of the industries covered in the survey reported an expansion in their business, and the drop registered not just in the institute's index of production, but also in its measures of employment, prices and backlogged orders. The group's index of new orders and prices showed them at their lowest levels since the late 1940s.
The ISM has conducted its survey since 1931.
Polls of purchasing managers through Europe and Asia showed similar declines. The European survey showed a particularly steep drop in industrial production beginning this fall, said Chris Williamson, chief economist for the Markit economic research firm. As of October the economies of the Eurozone showed an annualized production decline of 5.6 percent; by December the annualized figure had grown to 12 percent.
"A further worsening in terms of production and jobs looks likely in coming months," Williamson said in a news release.
Surveys in Russia and China also showed record low levels of manufacturing activity.
The outcome was such that Eric Fishwick, chief of economic research at the CLSA consulting firm, said that China's manufacturing industry may be nearing a recession.
"The manufacturing sector . . . is close to technical recession," Fishwick wrote in a news release on the survey.
The expansion of the global economic crisis from the financial sector to the broader economy has prompted governments worldwide to move to rekindle growth. The incoming administration of President-elect Barack Obama is expected to move quickly on a U.S. stimulus package. European Union governments have made a commitment to set aside an increased portion of their gross domestic product for infrastructure and other investments.
Asian countries have taken similar steps. India on Friday announced it would further lower interest rates and ease bank lending requirements while also allowing local governments to spend up to $6 billion on public works projects.
The poor manufacturing data -- almost a given in the current climate -- didn't spoil a rally in global stocks to kick off the year. Asian markets closed higher, with Hong Kong's Hang Seng index gaining 4 percent. European exchanges were generally up by 2 to 3 percent near the end of the trading day. On Wall Street, major exchanges had all gained between 1 and 2 percent in morning trading.
Manufacturing Falls to 28-Year Low - washingtonpost.com