ISM Manufacturing Index Expands for First Time Since 2022

The Institute for Supply Management (ISM) manufacturing purchasing managers index (PMI) came in at 50.9 in January, pushing the index into expansion territory for the first time since October 2022. The latest reading was better than the forecast of 49.3.

Here is an excerpt from the latest report:

Fiore continues, “U.S. manufacturing activity expanded in January after 26 consecutive months of contraction. Demand clearly improved, while output expanded and inputs remained accommodative. Demand improvement includes: the (1) New Orders Index moving further into expansion territory, (2) New Export Orders Index moving back into expansion, (3) Backlog of Orders Index dropping slightly and continuing in contraction, and (4) Customers’ Inventories Index remaining in ‘too low’ territory. Output (measured by the Production and Employment indexes) was positive, as factory output improved compared to December, indicating that panelists’ companies are proceeding with growth plans. Employment was stable as final head-count adjustments were made, in many cases among the white-collar workforces. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories declining, but imports returning to expansion, prices increasing and supplier deliveries marginally slowing.

“Demand and production improved; and employment expanded. However, staff reductions continued with many companies, but at weaker rates. Prices growth was moderate, indicating that further growth will put additional pressure on prices. As predicted, maintaining a slower rate of price increases as demand returns will be a major challenge for 2025. Forty-three percent of manufacturing gross domestic product (GDP) contracted in January, down from 52 percent in December. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 8 percent in January, a dramatic 41-percentage point improvement compared to the 49 percent reported in December. Four of the six largest manufacturing industries (Petroleum & Coal Products; Chemical Products; Machinery; and Transportation Equipment) expanded in January, up from none in December,” says Fiore.