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ISM Report: Manufacturing Continues to Contract

Jan. 4, 2023
“This is the second month of contraction and, as predicted, will likely be the norm for the PMI at least through the first quarter of 2023," says Timothy Fiore.

Manufacturing economic activity shrank for the second month in a row, according to the Institute for Supply Management’s December 2022 manufacturing sector report. The contracting activity follows an extensive period of growth from the summer of 2020 that lasted 29 months.

In December, the ISM’s Purchasing Manager’s Index fell to 48.4%, 0.6 points lower than November. Any number higher than 50% represents growth, and anything lower than 50% represents contraction. The new orders index and the production index have both contracted 2 and 3 points, respectively. Although, after dropping in November, the employment index increased 3 points to 51.4% in December.

As was seen in the November report, demand continues to dwindle. Timothy Fiore, chair of the ISM’s manufacturing business survey committee, noted that “Demand eased, with the (1) New Orders Index remaining in contraction territory, (2) New Export Orders Index markedly below 50 percent, (3) Customers’ Inventories Index in ‘just right’ territory, and (4) Backlog of Orders Index recovering slightly but still in strong contraction.”

In the comments of the survey, a chemical products executive mentions how this is affecting their own business, saying the current customer demand is down significantly.

Other comments echo prevailing issues in the manufacturing sector, with leaders in multiple industries noting the struggles with skilled labor shortages.

One respondent, an executive in miscellaneous manufacturing, looks forward to what is to come. “Overall, supply chain conditions have stabilized tremendously since the fourth quarter of 2021. Issues remain, but the list is quite a bit shorter … The outlook is positive for 2023,” they said.

About the Author

Anna Smith | News Editor

News Editor

LinkedIn: https://www.linkedin.com/in/anna-m-smith/ 

Bio: Anna Smith joined IndustryWeek in 2021. She handles IW’s daily newsletters and breaking news of interest to the manufacturing industry. Anna was previously an editorial assistant at New Equipment DigestMaterial Handling & Logistics and other publications.

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