Tempe, Arizona — Economic activity in the manufacturing sector contracted in January for the fourth consecutive month, while the overall economy grew for the 80th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.
The report was issued by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee. "The January PMI registered 48.2%, an increase of 0.2 percentage point from the seasonally adjusted December reading of 48%. The New Orders Index registered 51.5%, an increase of 2.7 percentage points from the seasonally adjusted reading of 48.8% in December. The Production Index registered 50.2%, 0.3 percentage point higher than the seasonally adjusted December reading of 49.9%. The Employment Index registered 45.9%, 2.1 percentage points below the seasonally adjusted December reading of 48%. Inventories of raw materials registered 43.5%, the same reading as in December. The Prices Index registered 33.5%, the same reading as in December, indicating lower raw materials prices for the 15th consecutive month. Comments from the panel indicate a mix ranging from strong to soft orders, as eight of our 18 industries report an increase in orders, and seven industries report a decrease in orders."
Of the 18 manufacturing industries, eight are reporting growth in January in the following order: textile mills; wood products; miscellaneous manufacturing; printing & related support activities; furniture & related products; computer & electronic products; machinery; and electrical equipment, appliances & components. The 10 industries reporting contraction in January — listed in order — are: apparel, leather & allied products; nonmetallic mineral products; petroleum & coal products; paper products; transportation equipment; plastics & rubber products; fabricated metal products; food, beverage & tobacco products; primary metals; and chemical products.
January 2016 Manufacturing Index Summaries
PMI
Manufacturing contracted in January as the PMI registered 48.2%, an increase of 0.2 percentage point from the seasonally adjusted December reading of 48%, indicating contraction in manufacturing for the fourth consecutive month. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.
A PMI above 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the January PMI indicates growth for the 80th consecutive month in the overall economy, while indicating contraction in the manufacturing sector. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the PMI for January (48.2%) corresponds to a 1.6% increase in real gross domestic product (GDP) on an annualized basis."
New orders
ISM’s New Orders Index registered 51.5% in January, an increase of 2.7 percentage points when compared to the seasonally adjusted December reading of 48.8%, indicating growth in new orders in January following two consecutive months of contraction in new orders. A New Orders Index above 52.2%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).
The eight industries reporting growth in new orders in January — listed in order — are: wood products; furniture & related products; electrical equipment, appliances & components; miscellaneous manufacturing; primary metals; machinery; computer & electronic products; and chemical products. The seven industries reporting a decrease in new orders during January — listed in order — are: apparel, leather & allied products; paper products; transportation equipment; nonmetallic mineral products; plastics & rubber products; food, beverage & tobacco products; and fabricated metal products.
Production
ISM’s Production Index registered 50.2% in January, which is an increase of 0.3 percentage point when compared to the seasonally adjusted 49.9% reported for December, indicating growth in production in January following two consecutive months of contraction in production. An index above 51.3%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
The six industries reporting growth in production during the month of January — listed in order — are: textile mills; electrical equipment, appliances & components; primary metals; computer & electronic products; miscellaneous manufacturing; and machinery. The eight industries reporting a decrease in production during January — listed in order — are: apparel, leather & allied products; nonmetallic mineral products; fabricated metal products; transportation equipment; petroleum & coal products; paper products; food, beverage & tobacco products; and chemical products.
To read the full National Report, click here.
Source: ISM