Economic activity in the U.S. manufacturing sector grew in January, led by apparel and home goods, the Institute for Supply Management (ISM) noted in its monthly “Report On Business.”
ISM’s manufacturing purchasing manager’s index (PMI) registered 57.6 percent, 1.2 percent lower than the seasonally adjusted December reading of 58.8 percent. A manufacturing PMI above 48.7 percent generally indicates an expansion of the overall economy, ISM said, meaning the January Manufacturing PMI showed the overall economy grew for the 20th consecutive month following contraction in April and May of 2020.
The 14 manufacturing industries reporting growth in January were led by apparel, leather and allied products, and furniture and related products.
“The manufacturing PMI continued to indicate strong sector expansion and U.S. economic growth in January,” Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee, said. “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, but January was the third straight month with indications of improvements in labor resources and supplier delivery performance. Still, there were shortages of critical intermediate materials, difficulties in transporting products and lack of direct labor on factory floors due to the Covid-19 Omicron variant.”
Fiore said meeting demand remains a challenge due to hiring difficulties and labor turnover. For the third month in a row, Business Survey Committee panelists’ comments suggest month-over-month improvement on hiring, offset by backfilling required to address employee turnover at a higher rate, supplier performance and improvements in the transportation sector, he noted.
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ISM’s New Orders Index registered 57.9 percent in January, a decrease of 3.1 percentage points compared to the seasonally adjusted 61 percent reported in December. A New Orders Index above 52.9 percent is generally consistent with an increase in the Census Bureau’s series on manufacturing orders.
Eleven of 18 manufacturing industries reported growth in new orders in January, led by apparel, leather and allied products, and furniture and related products, while textile mills were one of two industries reporting a decline in new orders in January.
The Production Index registered 57.8 percent in January, 1.6 percent points lower December, but indicating growth for the 20th consecutive month. An index above 52.4 percent is considered consistent with an increase in the Federal Reserve Board’s Industrial Production figures.
The 10 industries reporting growth in production during the month were led by furniture and related products. The three industries reporting a decrease in January production were apparel, leather and allied products, and textile mills.
ISM’s Employment Index registered 54.5 percent in January, a 0.6 percent increase from December. An Employment Index above 50.5 percent is generally on par with an increase in Bureau of Labor Statistics (BLS) data on manufacturing employment.
“Survey panelists’ companies are still struggling to meet labor-management plans, but for a fifth month, there were modest signs of progress,” Fiore said. “An overwhelming majority of panelists again indicate their companies are increasing head counts or attempting to, as 84 percent of Employment Index comments were hiring focused. Among those respondents, 31 percent expressed difficulty in filling positions, down from 37 percent in December.”
Apparel, leather and allied products led the nine of 18 manufacturing industries reporting employment growth in January. Also included were furniture and related products.
The delivery performance of suppliers to manufacturing organizations was slower in January, as the Supplier Deliveries Index registered 64.6 percent, 0.3 percent lower than December. ISM noted that a reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.
Sixteen of 18 industries reported slower supplier deliveries in January, topped by apparel, leather and allied products, and including textile mills and furniture and related products.
The Inventories Index registered 53.2 percent in January, 1.4 percentage points lower than the seasonally adjusted 54.6 percent reported for December. An Inventories Index greater than 44.4 percent is usually consistent with expansion in the Bureau of Economic Analysis figures on overall manufacturing inventories.
Apparel, leather and allied products also topped the list of 12 industries reporting higher inventories in January. Also included were furniture and related products and textile mills.
ISM’s Customers’ Inventories Index was 33 percent in January, 1.3 percent higher than December, indicating that customers’ inventory levels were considered too low.
“Customers’ inventories are too low for the 64th consecutive month, a positive for future production growth,” Fiore said. “For 18 straight months, the Customers’ Inventories Index has been at historically low levels.”
No industries reported higher customers’ inventories in January. The 11 industries reporting customers’ inventories as too low during January were led by apparel, leather and allied products, and also included furniture and related products.
The ISM Prices Index registered 76.1 percent, an increase of 7.9 percent compared to December, meaning raw materials prices increased for the 20th consecutive month. A Prices Index above 52.6 percent is generally consistent with an increase in the BLS Producer Price Index for Intermediate Materials.
In January, all 17 industries reported paying increased prices for raw materials, topped by apparel, leather and allied products, and textile mills, and also including furniture and related products.
ISM’s Backlog of Orders Index came in at 56.4 percent last month, a 6.4 percent decrease from December. Apparel, leather and allied products, textile mills, and furniture and related products were the top three of 11 industries reporting growth in order backlogs in January.
ISM’s New Export Orders Index rose 0.1 percent in January to 53.7 percent, while the Imports Index increased 1.3 percent to 55.1 percent.
“Imports expanded in January for the third consecutive month, in spite of continuing challenges with throughput at U.S. ports of entry,” Fiore said. “Overland transport challenges and container shortages continue to persist across the global supply chain in the buildup prior to Lunar New Year. However, there were signs of improvement in the month of January, based on panelists’ comments. Imports will continue to be challenged through the first half of 2022, though, due to the pandemic.”
The nine industries reporting growth in imports in January were topped by furniture and related products.