January 2017 Manufacturing ISM Report on Business: PMI at 56%

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Economic activity in the manufacturing sector expanded in January, and the overall economy grew for the 92nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee; “The January PMI registered 56%, an increase of 1.5 percentage points from the seasonally adjusted December reading of 54.5%. The New Orders Index registered 60.4%, an increase of 0.1 percentage point from the seasonally adjusted December reading of 60.3%. The Production Index registered 61.4%, 2 percentage points higher than the seasonally adjusted December reading of 59.4%. The Employment Index registered 56.1%, an increase of 3.3 percentage points from the seasonally adjusted December reading of 52.8%. Inventories of raw materials registered 48.5 percent, an increase of 1.5 percentage points from the December reading of 47%. The Prices Index registered 69% in January, an increase of 3.5 percentage points from the December reading of 65.5%, indicating higher raw materials prices for the 11th consecutive month. The PMI®, New Orders, and Production Indexes all registered their highest levels since November of 2014, and comments from the panel are generally positive regarding demand levels and business conditions.”

PMI 

Manufacturing expanded in January as the PMI registered 56 percent, an increase of 1.5 percentage points from the seasonally adjusted December reading of 54.5%, indicating growth in manufacturing for the fifth consecutive month. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting. 

A PMI above 43.3%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the January PMI indicates growth for the 92nd consecutive month in the overall economy, and indicates growth in the manufacturing sector for the fifth consecutive month. Holcomb stated, "The past relationship between the PMI® and the overall economy indicates that the PMI for January (56%) corresponds to a 4% increase in real gross domestic product (GDP) on an annualized basis."

New Orders 

ISM’s New Orders Index registered 60.4 percent in January, which is an increase of 0.1 percentage point when compared to the seasonally adjusted 60.3% reported for December, indicating growth in new orders for the fifth consecutive month. A New Orders Index above 52.3%, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars). 

The 12 industries reporting growth in new orders in January — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing; Chemical Products; Paper Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Primary Metals; Machinery; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The five industries reporting a decrease in new orders during January are: Nonmetallic Mineral Products; Wood Products; Textile Mills; Computer & Electronic Products; and Furniture & Related Products.

Production 

ISM’s Production Index registered 61.4 percent in January, which is an increase of 2 percentage points when compared to the seasonally adjusted 59.4% reported for December, indicating growth in production for the fifth consecutive month. An index above 51.4%, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures. 

The 10 industries reporting growth in production during the month of January — listed in order — are: Miscellaneous Manufacturing; Apparel, Leather & Allied Products; Paper Products; Petroleum & Coal Products; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Machinery; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The five industries reporting a decrease in production during January are: Wood Products; Textile Mills; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Furniture & Related Products.

Employment 

ISM’s Employment Index registered 56.1% in January, an increase of 3.3 percentage points when compared to the seasonally adjusted December reading of 52.8%, indicating growth in employment in January for the fourth consecutive month. An Employment Index above 50.5%, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment. 

Of the 18 manufacturing industries, the 10 reporting employment growth in January — listed in order — are: Textile Mills; Paper Products; Food, Beverage & Tobacco Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Miscellaneous Manufacturing; Transportation Equipment; Computer & Electronic Products; and Nonmetallic Mineral Products. The five industries reporting a decrease in employment in January are: Plastics & Rubber Products; Petroleum & Coal Products; Primary Metals; Fabricated Metal Products; and Printing & Related Support Activities.

Supplier Deliveries 

The delivery performance of suppliers to manufacturing organizations was slower in January as the Supplier Deliveries Index registered 53.6%, which is 0.6 percentage point higher than the seasonally adjusted 53% reported for December. A reading below 50% indicates faster deliveries, while a reading above 50% indicates slower deliveries. 

The 11 industries reporting slower supplier deliveries in January — listed in order — are: Textile Mills; Paper Products; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The two industries reporting faster supplier deliveries in January are: Electrical Equipment, Appliances & Components; and Chemical Products.