Economic activity in the manufacturing sector expanded in January, and the overall economy grew for the 117th consecutive month as raw materials prices fell for the first time in almost three years, according to the Institute for Supply Management’s Manufacturing Report On Business for January.
The Purchasing Managers’ Index rose 2.3 percentage points to 56.6% in January, from December, said Timothy Fiore, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. A reading above 50% indicates the manufacturing economy is generally expanding and below 50% indicates it’s generally contracting.
The New Orders Index increased 6.9 percentage points to 58.2%, the Production Index rose 6.4 percentage points to 60.5%, the Employment Index fell 0.5 percentage points to 55.5%, the Suppliers Deliveries Index decreased 2.8 percentage points to 56.2%, the Inventories Index increased 1.6 percentage points to 52.8%, and the Prices Index declined 5.3 percentage points to 49.6% — indicating lower raw materials prices for the first time in nearly three years.
Business strength continues to expand as demand and output have been strong, according to the report. Demand rose while the New Orders Index increased to the high 50s, the Customers’ Inventories Index remained too low and the Backlog of Orders was nearly at a level of no expansion. Consumption rose, production increased and employment continued to expand at December levels. Inputs, which comprise supplier deliveries, inventories and imports, improved but are negative to the growth of the Purchasing Managers’ Index.
“Exports continue to expand, but at the lowest level since the fourth quarter of 2016,” Fiore said. “Prices contracted for the first time since the first quarter of 2016. The manufacturing sector continues to expand, reversing December’s weak expansion, but inputs and prices indicate fundamental changes in supply chain constraints.”
Following 14 manufacturing industries grew in January: Textile mills; computer and electronic products; plastics and rubber products; miscellaneous manufacturing; furniture and related products; printing and related support activities; primary metals; chemical products; transportation equipment; machinery; fabricated metal products; petroleum and coal products; food, beverage and tobacco products; and electrical equipment, appliances and components. The only industry that contracted in January was nonmetallic mineral products.