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Economic activity in the United States manufacturing sector expanded in December for the 17th consecutive month, and the overall economy grew for the 20th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business.

"We saw significant recovery for much of the U.S. manufacturing sector in 2010," said Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management. Manufacturing Business Survey Committee. The recovery centered on strength in autos, metals, food, machinery, computers and electronics. Industries tied primarily to housing continue to struggle.

Manufacturers that export benefitted from both global demand and the weaker dollar. December's readings in new orders and production, combined with positive comments from the panel, should create momentum as the economy goes into the first quarter of 2011, Ore said.

The past relationship between the PMI and the overall economy indicates that the average PMI for January through December 2010 (57.3 percent) corresponds to a 5.1 percent increase in real gross domestic product (GDP), the monthly report said. In addition, if the PMI for December (57 percent) is annualized, it corresponds to a 5 percent increase in real GDP annually.

ISM's New Orders Index registered 60.9 percent in December, an increase of 4.3 percentage points when compared to the 56.6 percent reported in November. This is the 18th consecutive month of growth in the New Orders Index. A New Orders Index above 50.2 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars). 

ISM's Employment Index registered 55.7 percent in December, 1.8 percentage points lower than the 57.5 percent reported in November. This is the 13th consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

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