Manufacturing activity falls in December; PMI up to 49.1%
by February 1, 2024 10:22 am 465 views
Economic activity in the manufacturing sector declined in January for the 15th consecutive month, according to the Institute for Supply Management (ISM).
The ISM released Thursday (Feb. 1) the January Manufacturing ISM Report on Business that shows the purchasing managers’ index (PMI) increased by 2 percentage points to 49.1% in January from December. A PMI reading below 50% indicates economic activity in the manufacturing sector is contracting.
According to the January report, new orders rose, backlogs fell and production increased. Employment decreased. Supplier deliveries were faster. Raw materials inventories declined, and customers’ inventories were too low. Prices rose. Exports declined, and imports rose.
“The U.S. manufacturing sector continued to contract, though at a marginal rate compared to December,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee. “Demand moderately improved, output remained stable and inputs are accommodative.
“Demand remains soft but shows signs of improvement, and production execution is stable compared to December, as panelists’ companies continue to manage outputs, material inputs and labor costs,” Fiore added. “Suppliers continue to have capacity.”
The four manufacturing industries that reported growth in January were apparel, leather and allied products, textile mills, transportation equipment and chemical products.
Respondents in the report were mixed on demand and the outlook for the year.
In the chemical products industry, a respondent said, “The start of 2024 looks good. Sales are above expectations, and costs are mostly stable. A few commodities are up in cost due to supply shortages. Many previously short commodities market positions have corrected themselves. There is a real short-term increase in the cost of international freight.”
A respondent in the transportation equipment industry said, “The commercial vehicle market appears to be retracting a bit in 2024 compared to last year. Forecast sales have decreased slightly in most product segments, with only limited growth related to customers’ competitive sourcing and moves to new technology. Most supply chains, including for semiconductors, have stabilized, with the only major escalation now being transit through the Red Sea.”
In the computer and electronic products industry, a respondent said, “U.S. economic outlook is affecting customer orders, and the current backlog is quite low compared to past quarters. Waiting on potential improvements from the CHIPS and Science Act.”
According to a respondent in the food, beverage and tobacco products industry, “Business continues to stabilize. Cash flow will be tight in 2024.” A respondent in the primary metals industry said “conditions are positive” but was concerned about falling prices in the coming months.
In the machinery industry, a respondent said, “December sales were very strong but slower for the first part of January, as was expected. We expect to see steady sales going forward if the (U.S. Federal Reserve) continues to hold rates and suggests a rate cut in the future.”
A respondent in the fabricated metals products industry reported a “good start to the year. We had budgeted a 3.5% increase over 2023. We expect it to be a challenging year. Currently, orders are positive in our automotive OEM and automotive aftermarket business. Our industrial business sector is looking weak at the moment. Still expect to achieve budget forecasts through the first quarter. (We) feel January is running high for automotive because, at the end of December, many OEMs canceled the last few weeks of orders to reduce inventory levels.”
In the miscellaneous manufacturing industry, a respondent said, “Order backlog, which was at historically high levels, is diminishing due to supply chain improvements and slight slowdown of orders.” In the electrical equipment, appliances and components industry, a respondent said, “Demand continues to be slow. Reduction from the second half of 2023 has continued into this year. We are adjusting production to match demand.” In the textile mills industry, a respondent said, “Remarkable slowdown in business in December. January has picked up but not to previous-year levels.”