The Institute for Supply Management (ISM) said that manufacturing sentiment remained somewhat negative in January. The purchasing managers’ index for the sector edged marginally higher, up from 48.0 in December to 48.2 in January. It was the fourth straight month with the headline PMI under 50, which would suggest contracting sentiment among manufacturers over that time frame. This mainly reflected deteriorating employment (down from 48.0 to 45.9) and inventories (unchanged at 43.5), with the decline in hiring at its lowest level since June 2009, the last official month of the Great Recession. Indeed, manufacturers continue to worry about the impact of the global slowdown as we start the new year. This can be seen in export growth (down from 51.0 to 47.0). The exports index has contracted in seven of the past eight months on the strong dollar and soft growth abroad.
Yet, the report was not all bad news. New orders (up from 48.8 to 51.5) grew at their fastest rate in five months, rebounding after two consecutive months of declining demand. In addition, production (up from 49.9 to 50.2) appears to have stabilized, with output expanding ever-so-marginally in January. As such, production was very soft, but – and this is the key – positive. Another positive was the fact that pricing pressures (unchanged at 33.5) continue to be quite minimal, pushed lower by falling energy prices. Of course, declining commodity prices also provide negative impacts for manufacturing activity, as we have seen in the energy sector and its supporting supply chain.