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ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the January 2024 Manufacturing ISM^® Report On Business^® emphasis mine.

“The U.S. manufacturing sector continued to contract, though at a marginal rate compared to December. Demand moderately improved, output remained stable and inputs are accommodative. Demand moderated, with the (1) New Orders Index expanding at a respectable rate, (2) New Export Orders Index in a headwind and (3) Backlog of Orders Index remaining above 40 percent but still in fairly strong contraction territory at 44.7 percent. Also, the Customers’ Inventories Index contracted further, becoming more accommodative for future production. On balance, Output (measured by the Production and Employment indexes) expanded slightly, with a combined 0.1-percentage point upward impact on the Manufacturing PMI® calculation. Panelists’ companies maintained production levels month over month and continued head count reductions in January, with significant layoff activity. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth but are showing signs of stiffening. The Supplier Deliveries Index indicated faster deliveries for the 16th straight month, and the Inventories Index moved upward while remaining in moderate contraction territory. The Prices Index climbed into expansion (or ‘increasing’) territory as new pricing levels for 2024 went into effect.

“Two of the six biggest manufacturing industries (Transportation Equipment; and Chemical Products) registered growth in January.

“Demand remains soft but shows signs of improvement, and production execution is stable compared to December, as panelists’ companies continue to manage outputs, material inputs and labor costs. Suppliers continue to have capacity. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in January, down from 84 percent in December. More importantly, the share of sector GDP registering a composite PMI® calculation at or below 45 percent — a good barometer of overall manufacturing weakness — was 27 percent in January, compared to 48 percent in December, and 54 percent in November. Among the top six industries by contribution to manufacturing GDP in January, two (Machinery; and Computer & Electronic Products) had a PMI® at or below 45 percent, one fewer than in the previous month,” says Fiore.

The four manufacturing industries reporting growth in January are: Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; and Chemical Products. The 13 industries reporting contraction in January — in the following order — are: Wood Products; Machinery; Plastics & Rubber Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Paper Products; Miscellaneous Manufacturing; and Primary Metals.

Mixed Bag

The report is a mixed bag, but better than expected. The Bloomberg Econoday consensus was 47.4.

New Orders expanded for just the second time in 20 months. Production is up for the second month, but barely positive.

Tomorrow, the BLS reports jobs.

ADP Reports an Increase of 107,000 Private Payrolls

As a precursor to the jobs report, please see ADP Reports an Increase of 107,000 Private Payrolls, BLS Reports Friday

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