ISM PMI Still in Contraction at 48.2

Written by Sandy Williams

The Institute for Supply Management reports that manufacturing activity in January remained in contraction for the fourth consecutive month. The January PMI was 48.2, signaling continued weakness in the manufacturing sector despite overall growth for the economy. The reading was no surprise to economists, coming in just above expectations of 48.1 in a poll by Reuters.

New orders picked up increasing 2.7 percentage points from December, reaching 51.5 for the second non-contraction reading in five months. Production gained 0.3 points to 50.2 percent. Backlogs of orders remained in contraction for the eighth consecutive month with 52 percent of respondents seeing no change from December.

The raw material inventory index was unchanged from December at 43.5 with 11 industries reporting lower inventories in January, among them primary metals and fabricated metal products. Customer inventories were considered too high for the sixth month, unchanged at 51.5 from December’s reading.

New export orders decreased 4 points to 47.0 percent. The import index grew 5.5 points to 51 percent following three consecutive months of contraction.

The January index reports a decrease in raw material pricing with the index at 33.5.

Bloomberg called the January ISM report a “downbeat opening to 2015 which follows a definitively downbeat year for the factory sector in 2015.”

A sampling of comments by respondents follows:

 –  “The oil and gas sector continues to be challenged by low oil and gas prices. Risk of suppliers filing for bankruptcy and reducing their workforce is becoming an increasing risk. Our company workforce is also declining.” (Petroleum & Coal Products)
 –  “We are a bit slower, but staying busy.” (Fabricated Metal Products)
 –  “Business is still strong, but slowing.” (Transportation Equipment)
 –  “2016 starting off with strong orders.” (Primary Metals)


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