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Manufacturing Cools Slightly in January

Bill Koenig
By Bill Koenig Senior Editor, SME Media

Manufacturing cooled slightly in January but remained at overall strong levels, the Institute for Supply Management said today.

The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, reached 58.7 percent last month. That was down from an adjusted 60.5 percent in December.

Both new orders and production deaccelerated last month, contributing to the lower index level for January. ISM said the index still represented an expanding manufacturing economy.

“Manufacturing continues to be improving,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. Manufacturing “is maintaining a high rate of expansion entering” 2021’s first quarter, he said.

The index is based on a survey of executives in 18 industries. A PMI above 50 percent indicates economic expansion while below 50 percent shows contraction.

The index has been in positive territory for eight consecutive months. The PMI has averaged 53.1 percent the past 12 months.

Manufacturing was hammered in the first half of 2020 by the COVID-19 pandemic. Factory shutdowns occurred at that time to try to slow the spread of the virus. Factories reopened with new safety procedures.

Sixteen of the 18 industries surveyed by ISM reported economic growth in January, including machinery, primary metals, fabricated metal products, transportation equipment, and miscellaneous manufacturing. Two industries reported contraction: printing and petroleum & coal products.

The group’s New Orders Index slipped to 61.1 percent last month from 67.5 percent in December. Of 18 industries, 13 reported an increase in orders, with two reporting a decline.

ISM’s Production Index softened to 60.7 percent in January from 64.7 percent the month before. Twelve industries reported a gain in output while two reported a cut in production.

Fiore said despite the lower figures, the new orders and production indexes “are really strong numbers.”

The institute’s Employment Index improved to 52.6 percent last month, up from 51.7 percent in December. Six of the 18 industries reported job gains.

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