January Manufacturing ISM Report On Business

(February 3, 2009) TEMPE, AZ &#151 Economic activity in the manufacturing sector failed to grow in January for the 12th consecutive month, and the overall economy contracted for the fourth consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

“January marked 12 months of contraction in the manufacturing sector. However, the rate of decline as measured by the PMI was slower than experienced in December. The January New Orders Index is at 33.2%, up from the seasonally adjusted 23.1% recorded in December. While this is a significant month-over-month improvement, it is still a sign of continuing weakness in the sector. Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper. On a positive note, the Prices Index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer,” explained Norbert J. Ore, C.P.M., chair of the Institute for Supply Management Manufacturing Business Survey Committee

Industries reporting contraction in January include Electrical Equipment, Appliances & Components; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Computer & Electronic Products; and various other fields.

Commodities rising in cost include Electrical Components. Lower price commodities include Aluminum and Aluminum Extrusions; Copper; and other products.

Manufacturing contracted in January as the PMI registered 35.6%, 2.7 percentage points higher than the seasonally adjustedI32.9% reported in December. This is the 12th consecutive month of contraction in the manufacturing sector. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting. “The past relationship between the PMI and the overall economy indicates that the PMI for January (35.6%) corresponds to a 1.7% decline in real gross domestic product (GDP) on an annual basis,” Ore notes.

ISM’s New Orders Index registered 33.2% in January, 10.1 percentage points higher than the 23.1% registered in December (seasonally adjusted). This is the 14th consecutive month of contraction in the New Orders Index. A New Orders Index above 48.8Upercent, over time, is generally consistent withIan increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars). A
Electrical Equipment and Computer & Electronic Products both failed to grow in January. Computer & Electronic Products is the only industry reporting higher inventories in January.

All industries except Primary Metals reported paying lower prices during January.

This report reflects the U.S Department of Commerce’s recently completed annual adjustment to the seasonal factors used to calculate the indexes.

For the full report and more information, visit www.ism.ws.

POST A COMMENT

Easily post a comment below using your Linkedin, Twitter, Google or Facebook account. Comments won't automatically be posted to your social media accounts unless you select to share.