The headline ISM Manufacturing PMI increased 1.5 points in December. The headline reading of 59.7 is the highest reading since September 2017 and the second highest reading since Q1 2011.
The ISM manufacturing index remains near cycle highs and has been in expansion territory for 16 straight months. Business sentiment improved notably following the 2016 election and, while there has been modest improvement in some of the hard manufacturing data, there remains a notable divergence between business sentiment and the hard data.
Given the diminished capacity in the economy due to the age of the current cycle, we believe that the hard data will continue to modestly grow rather than meaningfully reaccelerate. Therefore, we believe there is a higher likelihood that business sentiment reverts back to more modest levels versus the likelihood of any meaningful reacceleration in manufacturing growth.
The New Orders Index rose 5.4 points to 69.4, the highest level since 2003.
The Employment Index declined 2.7 points to 57.0.
The Prices Index rose 3.5 points to 69.0 and has been above 60 for 6 consecutive months.