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US PMI Breaks 26-Month Losing Streak in January

 

 

 

Manufacturing Index gets Just above Key 50 Mark

Feb. , 2025
 
   

The US Purchasing Managers Index (PMI) for January was released this week by the Institute for Supply Management (ISM), and came in at a level of 50.9, up from 49.2 in December, just above the key 50 mark that separates US manufacturing expansion from contraction.


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Alleviating supply chain conditions are noticeably pivoting back into acute shortage situations, with headwinds following  
 

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ISM says that move into expansion comes after 26 straight monthss of scores less than 50, but there must have been some data revisions, as until this report ISM had reported for one month, March 2024, when the index poked its head into contraction briefly with a score of 50.3.


But in the January report, March 2024 gets a score of score of 48.5.
ISM says that the overall economy continued in expansion for the 57th month after one month of contraction in April 2020. The PMI itself tracks closely but not exactly with the overall US economy.

A Manufacturing PMI above 42.3, over a period of time, generally indicates an expansion of the overall economy, according to ISM.

The other PMI numbers we track were mostly positive.

The New Orders Index expanded in January for the third consecutive month after seven months in contraction, registering 55.1, an increase of 3 percentage points compared to December’s seasonally adjusted figure of 52.1, in good news for future US manufacturing activity.

The Production Index elevated into expansion territory in January, registering 52.5, 2.6 percentage points higher than the seasonally adjusted December reading of 49.9. Prior to this month’s reading, the index was in contraction territory for eight consecutive months.

The Prices Index came in at 54.9, 2.4 percentage points higher compared to the December reading of 52.5, indicating prices increased for components, materials and other inputs rose for the fourth straight month in January (above 50 = rising prices).

However, the Backlog of Orders Index registered 44.9, a decrease of 1 percentage point compared to the December reading of 45.9, indicating order backlogs contracted for the 28th consecutive month after a 27-month period of expansion, with the index level still well below the 50 mark.

The delivery performance of suppliers was marginally slower in January, with the Supplier Deliveries Index registering 50.9, a 0.8-percentage point increase compared to the reading of 50.1 reported in December.

Supplier Deliveries is the only ISM index that is inversed, with a reading of above 50 indicating slower deliveries, which is typical as the economy improves and customer demand increases - or the reverse.

The Inventories Index registered 45.9 in January, down 2.5 percentage points compared to the seasonally adjusted reading of 48.4 reported in December. The last time the Inventories Index registered above 50 percent was in August, with the score below 50 indicating inventory levels at companies are decreasing.

Said Timothy Fiore, Chair of the Institute for Supply Management Manufacturing Business Survey Committee: “Demand and production improved; and employment expanded. However, staff reductions continued with many companies, but at weaker rates. Prices growth was moderate, indicating that further growth will put additional pressure on prices. As predicted, maintaining a slower rate of price increases as demand returns will be a major challenge for 2025.”

 

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As always, the ISM report provides a graphic of the PMI scores the last 12 months, which as can be seen indicates the measure has been below the key 50 for the past year until December and actually since November 2022. It is now averaging just 48.4 over the past year.

Source: ISM

Of the 18 sectors tracked by ISM, eight saw growth in December. Those were, in growth order: Textile Mills; Primary Metals; Petroleum & Coal Products; Chemical Products; Machinery; Transportation Equipment; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components.

As always, there were some interesting comments from PMI survey respondents.

“Alleviating supply chain conditions are noticeably pivoting back into acute shortage situations, with headwinds following. For aerospace and defense companies, critical minerals supply chains are tightening dramatically due to Chinese restrictions,” said one manager in transportation equipment sector.

“Volume in 2025 is targeting 2% growth. The organization is mindful of potential tariffs and what to do with re-routing or cost increases in supply chains that are impacted,” commented a manager in the food and beverage industry.
Finally, a manager in the fabricated metal products noted that “Capital equipment sales are starting 2025 off strong. Normally, we see a soft start to the year, so this strong start is unusual.”

 

What are your thoughts on this ISM PMI? Let us know your thoughts at the Feedback section below.

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