U.S. manufacturing activity expanded in January, though at a slightly slower rate than seen in December, according to the Institute for Supply Management’s monthly Report on Business. The ISM reports manufacturing activity eased back 1.8% in January to a reading of 58.7%. Any reading above 50 is considered expansionary and the U.S. manufacturing sector is now in its eighth straight month of expansion, according to the ISM.
New orders, production and employment all posted strong gains in January. Meanwhile, supplier deliveries continue to slow, while prices are on the rise and both exports and imports are growing.
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Optimism among manufacturing executives continues to be strong, with the ISM reporting, 3 positive comments for every cautious comment.
Said Timothy Fiore, Chairman of the ISM: “The manufacturing economy continued its recovery in December. Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential.”
One executive in the chemical products industry stated, “Business remains strong. Manufacturing running at full capacity.”
Of eighteen industries, sixteen reported growth in the month of January. Growing industries included electrical equipment, appliances & components; machinery; primary metals; chemical products; and fabricated metal products.
Printing and related support activities and petroleum & coal products were the only two industries to post contraction.
New Orders Still Expanding – But at a Slower Rate
New orders continued to expand strongly in January, though at a much slower rate than seen in December. The ISM’s New Orders Index declined 6.4% in January to a reading of 61.1%.
One executive in the fabricated metals industry told the ISM, ““Our current business demand is going way past pre-COVID-19 [levels].”
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Another respondent in the Transportation equipment sector reported “Very strong demand with limitations in supply to meet increased demand.”
Thirteen of eighteen industries reported an increase in new orders for January, led by primary metals; electrical equipment, appliances & components; machinery and plastics & rubber products.
Declines in new orders were seen in printing & related support activities; and textile mills.
Manufacturing Production Eases Back
Production also expanded in January at a slower rate than reported in December. The ISM reports its Production Index fell 4% to a current reading of 60.7% in January, slower than December’s reading, but still well into expansion territory.
January’s reading represents an eighth straight month of growth for manufacturing production.
Twelve of eighteen industries reported growth in output, led by machinery; primary metals; wood products; and electrical equipment. Both printing & related support activities and textile mills reported a contraction in production.
Employment Remains in Expansion
The ISM employment index is one metric that has struggled to remain in expansion. In January, employment inched up 0.9% to a reading of 52.6%. This is the second straight month that the employment index has registered an expansionary reading.
Manufacturing companies continue to struggle with the double whammy of COVID-19 and a skilled labor shortage.
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Said one respondent in the miscellaneous manufacturing industry, ““We have had an increase in employees testing positive for COVID-19, negatively impacting manufacturing.”
Another in the food, beverage and tobacco products industry stated: “Labor continues to be one of our largest challenges.”
Just six of eighteen industries reported employment growth in January, led by electrical equipment, appliances & components; wood products; primary metals; machinery and nonmetallic mineral products.
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