U.S. manufacturing activity expanded in January, though at a slower rate than reported in December, according to a new report released this morning by the Institute for Supply Management (ISM).
The ISM’s survey of purchase executives shows manufacturing activity in the U.S. expanded for a 105th consecutive month, registering at a robust 59.1%.
Any reading above 50 indicates economic expansion, according to the ISM.
The 59.1 reading is just 0.2% percentage points lower than December’s reading of 59.3, suggesting U.S. factories are humming along at a steady rate, after accelerating by 1.5% in December.
The ISM’s January survey shows new orders and production, while still in expansion territory, eased this past month, while employment decelerated by nearly 4%. Exports accelerated slightly faster than imports, while supplier deliveries slowed. Prices were on the rise.
Manufacturing activity in the U.S. has grown for a solid 17 consecutive months, led by a surge in new orders and production. The U.S. economy, overall, has also accelerated at a steady clip, with January marking the 103rd straight month of growth.
Fourteen of the eighteen industries surveyed by the ISM reported growth, led by textile mills and fabricated metal products; plastics and rubber products; primary metals; machinery; and transportation equipment.
Just four sectors reported contraction: printing & related support activities; wood products; furniture & related products; and nonmetallic mineral products.
U.S. manufacturing continues on winning streak in 2018
The ISM’s December report closeed out a solid year of accelerating manufacturing activity, with the index reaching its highest level since 2004, and though the index inched back slightly, industrial activity is holding steady at this historic high.
The Labor Department’s December jobs report shows the nation added 148,000 jobs in the last month of 2017, with employment in the manufacturing sector rising 1.7% year-over-year.
Meanwhile, orders for durable goods surged 2.9% in December, according to the Commerce Department, led by an uptick in new orders for military and civilian aircraft, and U.S. industrial production continues to post strong growth.
A stabilization of oil prices as well as a weaker dollar are among the influences behind current U.S. economic strength, and should help to drive growth in the months ahead.
All of this corresponds with data collected by IndustryNet, including strong manufacturing employment numbers for Ohio and Tennessee, as well as solid growth recorded in the fabricated metals industry and contract manufacturing.
U.S. supply executives optimistic on tax reform, business conditions
Looking ahead, the tax reform bill signed into law on December 22nd has the potential to ignite investment among the nation’s manufacturers, and add to the nation’s economic strength in the coming year.
Responses from supply executives across the U.S. reflect ongoing optimism about business conditions, particularly in light of the tax reform.
One company in the chemical products sector reported a 30% increase in capital expenditure in the 1st quarter, while others in the machinery sector reported increased business due to the reduction in tax rates.
Others spoke of a general improvement in business for the first quarter of 2018. Says on respondent in the computer & electronics sector: “Business outlook is positive on all fronts right now with our customers. Budgets are being approved for new projects, and component prices from suppliers have temporarily stabilized.”
A drop in new orders
Highlighting this month’s ISM report was the change in the New Orders Index, which eased back 2 percentage points after surging 5.4% in December.
However, new orders are still well into expansion territory at 65.4. This means new orders are still growing, but just at a slower rate.
According to the ISM, new orders have been expanding for the past 17 months, with December’s New Orders reading of 69.4 marking the index’s highest level since 2004.
Thirteen out of eighteen industries reported an increase in new orders, with textile mills; fabricated metals; apparel; leather & allied products; machinery; and primary metals leading growth in new orders.
The five industries reporting a contraction in new orders included wood products; furniture & related products; nonmetallic mineral products; printing & related support activities; as well as petroleum and coal products.
Production eases
Industrial production also inched down, with January’s reading at 64.5%, down 0.7% from December. The ISM’s Production Index, however, is now in its 17th consecutive month of growth.
Eleven of eighteen industries reported an increase in production, reports the ISM. For a second straight month, apparel, leather & allied products lead growth in production, followed by plastics & rubber products; fabricated metals; and primary metals.
Just two industries reported a decline in production: nonmetallic mineral products and printing & related support activities.
Employment expands, but at a slower rate
The ISM’s employment index shows the nation’s manufacturers are still ramping up hiring, but at a decelerating rate.
The ISM’s Employment Index fell 3.9% in January, after notching down 2.7% in December. Hiring is still strong, however, with the index at 54.2, well above contraction territory.
Only seven of eighteen industries reported job growth in last month’s survey, led by machinery, fabricated metals, petroleum & coal products; and primary metals.
Six industries reported contraction, and included furniture & related products; printing & related support activities; electrical equipment; and chemical products.
The Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide at the Institute for Supply Management (ISM). Read the complete report here.
