Manufacturing economic activity continued to contract at a slower rate last month, according to the Institute for Supply Management’s January 2024 report. The Purchasing Manager’s Index registered 49.1%, up 2 percentage points from December and the highest reading in over a year. The PMI also indicates overall economic expansion.
“Three out of five subindexes that directly factor into the Manufacturing PMI are in contraction territory, down from four in December,” said Timothy Fiore, chair of the ISM’s manufacturing business survey committee.
Of 17 industries, four reported growth last month: transportation equipment; chemical products; textile mills; and apparel, leather & allied products.
The new orders index entered expansion territory for the first time since August 2022 with a reading of 52.5%, 5.5 points higher than December’s seasonally adjusted reading. Anything lower than 50% represents contraction.
The production index also moved into expansion territory at 50.4%. The employment index is down 0.4 points from last month’s adjusted figure with a reading of 47.1% in January, indicating contraction at a faster rate.
In the comments of the survey, several respondents expressed a positive start to the year, observing stabilizing business conditions, diminishing order backlog and strong sales.
However, some remain wary of supply chain challenges: An executive in transportation equipment noted the current concern with shipping in the Red Sea. “There is a real short-term increase in the cost of international freight,” noted one respondent in the Chemical Products sector.