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Manufacturing Returns to Expansion in January

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing returned to economic expansion in January, helped by gains in new orders and production, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, reached 50.9 percent, according to a monthly report. That was up from 47.8 percent in December.

The results snapped a five-month streak of economic contraction. The January number also is in line with ISM’s forecast for an expanding manufacturing economy in 2020.

At the same time, the group wasn’t ready to say January was the start of a sustained improvement for the PMI.

“I think we have to wait and see,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a call with reporters. He called the January results “overall positive to cautious.”

The PMI is based on a survey of 350 purchasing and supply executives across 18 industries. It’s considered a leading economic indicator and a barometer of where the economy is heading. A PMI reading above 50 percent indicates economic expansion while below 50 percent reflects contraction.

The PMI has averaged 50.8 percent for the past 12 months.

In January, eight industries reported economic growth, including wood products, fabricated metal products and miscellaneous manufacturing. Eight reported economic contraction, including transportation equipment and machinery.

ISM’s New Orders Index went back into positive territory at 52 percent in January, better than December’s 47.6 percent. Ten of 18 industries reported an increase in new orders. Five said new orders declined.

The group’s Production Index surged to 54.3 percent last month from 44.8 percent in December. Seven industries reported an increase in output while seven said production declined.

ISM’s Employment Index remained in negative territory last month at 46.6 percent, although it was an improvement from December’s 45.2 percent. Four industries reported job gains while 10 reported cuts in jobs.

Fiore said companies were not replacing workers as they retire or depart rather than engaging in “aggressive” job cutting. “Labor forces are stable,” he said.

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