ISM Manufacturing Index Reaches 44-Month High

WALL STREET JOURNAL -- The U.S. manufacturing sector finished 2009 on a high note, helped by improving production and ordering activity, according to data released Monday by the Institute for Supply Management.The ISM's manufacturing purchasing managers' index rose to 55.9 last month, from 53.6 in November. December's reading was above the 54.0 forecasted by economists surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.

"The manufacturing sector grew for the fifth consecutive month in December as the PMI rose to 55.9, its highest reading since April 2006 when it registered 56," said Norbert Ore, who directs the survey for the ISM.

The ISM's new orders index increased to 65.5 last month, from 60.3 in November, while the production index rose to 61.8 from 59.9. Both indexes suggest orders and output were increasing strongly in December.

From the ISM report:
 
A PMI in excess of 41.2 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the eighth consecutive month in the overall economy, as well as expansion in the manufacturing sector for the fifth consecutive month.
 
Ore stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through December (46.3 percent) corresponds to a 1.6 percent increase in real gross domestic product (GDP). However, if the PMI for December (55.9 percent) is annualized, it corresponds to a 4.6 percent increase in real GDP annually."

MP: Add this to a long list of indicators pointing to a V-shaped economic recovery.