Fra ISM:

Manufacturing PMI^® at 50.9%

January 2025 Manufacturing ISM^® Report On Business^®

New Orders Growing and Backlogs Contracting
Production and Employment Growing
Supplier Deliveries Slowing
Raw Materials Inventories Contracting; Customers’ Inventories Too Low
Prices Increasing; Exports and Imports Growing

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in January after 26 consecutive months of contraction, say the nation’s supply executives in the latest Manufacturing ISM^® Report On Business^®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management^® (ISM^®) Manufacturing Business Survey Committee:

“The Manufacturing PMI^® registered 50.9 percent in January, 1.7 percentage points higher compared to the seasonally adjusted 49.2 percent recorded in December. The overall economy continued in expansion for the 57th month after one month of contraction in April 2020. (A Manufacturing PMI^® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index was in expansion territory for the third month after seven months of contraction, strengthening again to a reading of 55.1 percent, 3 percentage points higher than the seasonally adjusted 52.1 percent recorded in December. The January reading of the Production Index (52.5 percent) is 2.6 percentage points higher than December’s seasonally adjusted figure of 49.9 percent. The index returned to expansion after eight months in contraction. The Prices Index continued in expansion (or ‘increasing’) territory, registering 54.9 percent, up 2.4 percentage points compared to the reading of 52.5 percent in December. The Backlog of Orders Index registered 44.9 percent, down 1 percentage point compared to the 45.9 percent recorded in December. The Employment Index registered 50.3 percent, up 4.9 percentage points from December’s seasonally adjusted figure of 45.4 percent.

“The Supplier Deliveries Index indicated marginally slower deliveries, registering 50.9 percent, 0.8 percentage point higher than the 50.1 percent recorded in December. (Supplier Deliveries is the only ISM^® Report On Business^® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.) The Inventories Index registered 45.9 percent, down 2.5 percentage points compared to December’s seasonally adjusted reading of 48.4 percent.

“The New Export Orders Index reading of 52.4 percent is 2.4 percentage points higher than the ‘unchanged’ reading of 50 percent registered in December. The Imports Index returned to expansion in January, registering 51.1 percent, 1.4 percentage points higher than December’s reading of 49.7 percent.”

Fiore continues, “U.S. manufacturing activity expanded in January after 26 consecutive months of contraction. Demand clearly improved, while output expanded and inputs remained accommodative. Demand improvement includes: the (1) New Orders Index moving further into expansion territory, (2) New Export Orders Index moving back into expansion, (3) Backlog of Orders Index dropping slightly and continuing in contraction, and (4) Customers’ Inventories Index remaining in ‘too low’ territory. Output (measured by the Production and Employment indexes) was positive, as factory output improved compared to December, indicating that panelists’ companies are proceeding with growth plans. Employment was stable as final head-count adjustments were made, in many cases among the white-collar workforces. Inputs — defined as supplier deliveries, inventories, prices and imports — generally continued to accommodate future demand growth, with inventories declining, but imports returning to expansion, prices increasing and supplier deliveries marginally slowing.

“Demand and production improved; and employment expanded. However, staff reductions continued with many companies, but at weaker rates. Prices growth was moderate, indicating that further growth will put additional pressure on prices. As predicted, maintaining a slower rate of price increases as demand returns will be a major challenge for 2025. Forty-three percent of manufacturing gross domestic product (GDP) contracted in January, down from 52 percent in December. The share of manufacturing sector GDP registering a composite PMI^® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 8 percent in January, a dramatic 41-percentage point improvement compared to the 49 percent reported in December. Four of the six largest manufacturing industries (Petroleum & Coal Products; Chemical Products; Machinery; and Transportation Equipment) expanded in January, up from none in December,” says Fiore.

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

WHAT RESPONDENTS ARE SAYING

• “Customer orders slightly stronger than expected. Seeing more general price increases for chemicals/raw materials. No International Longshoremen’s Association strike is a tremendous help.” [Chemical Products]
• “Alleviating supply chain conditions are noticeably pivoting back into acute shortage situations, with headwinds following. For aerospace and defense companies, critical minerals supply chains are tightening dramatically due to Chinese restrictions. Concerns are growing of an environment of more supply chain shortages.” [Transportation Equipment]
• “As the U.S. administration transfers, we will continue to monitor impact of tariffs on materials used for manufacturing. China stimulus is helping us win orders and increase use of services and consumables. Cost pressures remain for all materials and parts but are starting to stabilize.” [Computer & Electronic Products]
• “Volume in 2025 is targeting 2-percent growth. The organization is mindful of potential tariffs and what to do with re-routing or cost increases in supply chains that are impacted.” [Food, Beverage & Tobacco Products]
• “Although we are in our busy season, our demand for the first two weeks of 2025 has outpaced normal levels for this period of time.” [Machinery]
• “Business is slowly improving.” [Electrical Equipment, Appliances & Components]
• “Capital equipment sales are starting 2025 off strong. Normally, we see a soft start to the year, so this strong start is unusual.” [Fabricated Metal Products]
• “New orders are still good but decreasing compared to previous quarters. Working through current backlog.” [Miscellaneous Manufacturing]
• “Automotive order demand continues to be consistent and on a steady pace. Beginning to look at hiring additional team members once again. Pricing is holding firm. Having to work overtime to cover plant inefficiency to date.” [Primary Metals]
• “Looking forward to a year of strong customer demand and higher sales than 2024.” [Textile Mills]

MANUFACTURING AT A GLANCE
January 2025