PMI expanded in January, first time since July 2019

by Talk Business & Politics staff ([email protected]) 198 views 

The Purchasing Managers’ Index (PMI) rose 3.1 percentage points to 50.9% in January, from December, as economic activity in the manufacturing sector expanded after falling for five consecutive months, according to the Institute for Supply Management (ISM). A reading above 50% indicates the manufacturing economy is expanding and below 50% indicates it’s contracting.

The ISM released Monday (Feb. 3) the Manufacturing ISM Report on Business for January. The PMI rose to show the manufacturing economy expanded in January after the index declined in December to 47.2% to the lowest reading since June 2009 when it was 46.3%. Meanwhile, the GDP rose 2.4%, and the overall economy grew for the 129th consecutive month.

The new orders index rose 4.4 percentage points to 52% in January, from December. The production index increased by 9.5 percentage points to 54.3%. The backlog of orders index rose 2.4 percentage points to 45.7%. The employment index rose 1.4 percentage points to 46.6%. The supplier deliveries index fell 1.7 percentage points to 52.9%. The inventories index declined 0.4 percentage points to 48.8%. The prices index increased by 1.6 percentage points to 53.3%. The new export orders index increased 6 percentage points to 53.3%. The imports index rose 2.5 percentage points to 51.3%.

Executives who were surveyed for the report had positive comments and sentiments that improved from December as the PMI expanding for the first time since July 2019. Demand expanded with the new orders index rising moderately and was supported by growth in new export orders, the customers’ inventories index was at the too-low status and the backlog of orders index fell for the ninth consecutive month but at a slower rate. Consumption, which is measured by the production and employment indexes, rose in response to an increase in new orders and contribute positively (a combined 10.9-percentage point increase) to the PMI.

Inputs, which comprise supplier deliveries, inventories and imports, fell in January as a result of a rising contraction in inventories while supplier deliveries expanded modestly. Imports expanded but also at a moderate rate. Inputs contributed negatively to the PMI, which was a reversal from December. Prices rose for the second month and marked a positive for 2020.

Global trade remained an issue, but executives who were surveyed for the report were positive for the first time in several months. The following were the strongest manufacturing industries: food, beverage and tobacco products, computer and electronic products. The weakest were petroleum and coal products. Overall, sentiment in January was moderately positive with regard to short-term growth.

The following eight manufacturing industries reported growth in January: furniture and related products; wood products; food, beverage and tobacco products; computer and electronic products; miscellaneous manufacturing; nonmetallic mineral products; chemical products; and fabricated metal products. Following eight industries contracted in January: printing and related support activities; apparel, leather and allied products; electrical equipment; appliances and components; petroleum and coal products; textile mills; transportation equipment; primary metals; and machinery.

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