Measures again Negative across the Board, though not as Bad as January

The US Purchasing Managers Index for January was released Wednesday by the Institute for Supply Management, and it indicated deepening slump for US manufacturing.

Supply Chain Digest Says...   a manager in the fabricated metals sector noted that “New orders are still strong; however, we continue to experience price increases (although at a slower rate than a year ago). What do you say? Click here to send us your comments   Click here to see reader feedback

With a score of 47.7, it means US manufacturing has fallen below the key 50 mark that separates expansion fr om contraction for the fourth consecutive month. While the index was 0.3 percentage point higher than the 47.4 percent recorded in January, the data show a weakening US economy.

In the last two months, the Manufacturing Index has been at its lowest levels since May 2020, when it registered just 43.

A chart of the PMI scores for the last 12 months is presented below; the average score over that period is now just 51.8, barely above the key 50 mark.

Perhaps more worrisome, the New Orders Index remained in contraction territory at 47.0, though while an increase of 4.5 percentage points compared to January’s reading of 42.5, it remained below 50,. in a negative sign for future US manufacturing activity.

Other measures in the November report were also weak. For example, the Production Index registered 47.3 in February, 0.7 percentage point lower than the January reading of 48.0, indicating a third month of contraction after 30 consecutive months of growth in output.

The ISM Prices Index registered 51.3, 6.8 percentage points higher compared to the January reading of 44.5, indicating raw materials prices are still falling but at a slower rate.

The index, which tracks whether costs of materials, components and other inputs are rising or falling, was just a few months ago above 80, as inflation took off.

The Backlog of Orders Index registered 45.1 in February, a 1.7-percentage point increase compared to January’s reading of 43.4, but indicating order backlogs contracted for the fifth consecutive month after a 27-month period of expansion.

US PMI Last 12 Months

Source: ISM

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Just four of the US 18 industry sectors tracked by the PMI reported growth in February: Apparel, Leather & Allied Products; Transportation Equipment; Petroleum & Coal Products; and Electrical Equipment, Appliances & Components..

As always, there were some interesting comments from PMI survey respondents. For example, one manager in the chemicals sector noted that “A slowdown in new housing construction and concerns of a slowing economy have customers delaying purchases in an effort to destock.”

“Business and new orders are softening, and customers are pushing out current orders.” a manager from the plastics & rubber products industry told ISM.

Finally, a manager in the fabricated metals sector noted that “New orders are still strong; however, we continue to experience price increases (although at a slower rate than a year ago), which we have not accounted for in this year’s budget. Restoring lost margin due to cost increases is a top priority.”

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