Economic activity in the manufacturing sector grew in January, with the overall economy achieving a 20th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
The report was issued by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.
“The January Manufacturing PMI registered 57.6 percent, a decrease of 1.2 percentage points from the seasonally adjusted December reading of 58.8 percent. This figure indicates expansion in the overall economy for the 20th month in a row after a contraction in April and May 2020. The New Orders Index registered 57.9 percent, down 3.1 percentage points compared to the seasonally adjusted December reading of 61 percent. The Production Index registered 57.8 percent, a decrease of 1.6 percentage points compared to the seasonally adjusted December reading of 59.4 percent.
“The Prices Index registered 76.1 percent, up 7.9 percentage points compared to the December figure of 68.2 percent. The Backlog of Orders Index registered 56.4 percent, 6.4 percentage points lower than the December reading of 62.8 percent. The Employment Index registered 54.5 percent, 0.6 percentage point higher compared to the seasonally adjusted December reading of 53.9 percent. The Supplier Deliveries Index registered 64.6 percent, down 0.3 percentage point from the December figure of 64.9 percent. The Inventories Index registered 53.2 percent, 1.4 percentage points lower than the seasonally adjusted December reading of 54.6 percent.
“The New Export Orders Index registered 53.7 percent, up 0.1 percentage point compared to the December reading of 53.6 percent. The Imports Index registered 55.1 percent, a 1.3-percentage point increase from the December reading of 53.8 percent.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, but January was the third straight month with indications of improvements in labor resources and supplier delivery performance. Still, there were shortages of critical intermediate materials, difficulties in transporting products and lack of direct labor on factory floors due to the COVID-19 omicron variant. Quits rate and early retirements hinder reliable consumption. Panel sentiment remains strongly optimistic, with seven positive growth comments for every cautious comment, up from December’s ratio of 6-to-1.
“Demand expanded, with the (1) New Orders Index slowing but remaining in strong growth territory, supported by continued expansion of new export orders, (2) Customers’ Inventories Index remaining at a very low level and (3) Backlog of Orders Index slowing but settling at more normal growth levels. Consumption (measured by the Production and Employment indexes) grew during the period, though at a slower rate, with a combined negative one-percentage point change to the Manufacturing PMI calculation.
“The Employment Index expanded for a fifth straight month, with signs that ability to hire continues to improve, though somewhat offset by continued challenges of turnover (quits and retirements) and resulting backfilling. Limited expansion strength in production in January, primarily due to absenteeism rates as a result of omicron, was the biggest reason PMI growth was held back. Inputs — expressed as supplier deliveries, inventories, and imports — continued to constrain production expansion, but there are clear indications of improved delivery performance. The Supplier Deliveries Index again slowed while the Inventories Index expanded, both at a slower rate. In January, the Prices Index increased for the 20th consecutive month, at a faster rate (an increase of 7.9 percentage points) compared to December, indicating that supplier pricing power continues to rise.
“Manufacturing performed well for the 20th straight month, with demand and consumption registering month-over-month growth. Meeting demand remains a challenge, due to hiring difficulties and labor turnover at all tiers. For the third month in a row, Business Survey Committee panelists’ comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover at a higher rate, supplier performance and improvements in the transportation sector,” says Fiore.
Among the 14 manufacturing industries reporting growth in January are: Miscellaneous Manufacturing; Machinery; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Computer & Electronic Products. The only industry reporting a decrease in January compared to December is Paper Products.