Economic activity in the nation’s manufacturing sector declined for the fifth consecutive month in December — falling to its lowest level in a decade.
According to the National Association of Purchasing Management’s (NAPM) Manufacturing Business Survey, the Purchasing Managers’ Index (PMI) fell to 43.7 percent, its lowest point since April 1991 when it was 42.9 percent.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
Leonard Lardaro, an economics professor at the University of Rhode Island, said the numbers are “something that’s paid a lot of attention to” as the study is based on what economists call a Defusion Index. The index represents a survey of industry officials, Lardaro said.
“What it means is that if the number is above 50 the majority of people say things are getting better,” he said. “But if that number is below 50, the majority of people are saying that things are going down.”
NAPM’s December’s PMI represents a decrease of 4 percentage points from 47.7 percent in November. The NAPM’s Production Index fell 7.2 percentage points from 49.6 in November to 42.4 in December and the New Orders Index declines sharply from 48.4 percent in November to 42 percent in December.
“The overall picture is one of continued softening in manufacturing activity in December,” said Nobert J. Ore, chairman of the NAPM’s study. “The manufacturing sector is definitely struggling at this point. The year (2000) began very strong for manufacturing with the PMI at 56.3 percent in January and reaching its high for the year at 56.9 percent in February. However, the PMI experienced persistent deceleration in growth through July and then began contracting in August. For manufacturing, higher interest rates and higher energy prices in 2000 have contributed greatly toward a lack- luster year for most of the sector.”
And according to Lardaro, the trend could continue into 2001.
“There is reason to believe that this weakness in manufacturing could continue at least through the middle of the year,” he said. “It takes six to nine months for industry to feel the effects of the Federal Reserve raising or lowering interest rates. Interest rates were raised last May and we got the warnings in November and December. The rates were just lowered, but it will probably be the third quarter before the effects are felt.”
Lardaro said though it appears that economically things are beginning to slow, he doesn’t believe it will result in a recession.
“Manufacturing nationally has clearly stumbled,” he said. “But we are not in an overall recession and I don’t see us going in to one in the next six to nine months. This will be worked off, interest rates are coming down and I think we are going to make the transition to a more sustainable rate of growth.”
