Manufacturing, overall economy softens in January

Economic activity in the U.S. manufacturing sector expanded for the third month in a row, while the overall economy contracted for the second month in a row in January, according to the Institute for Supply Management (ISM).

ISM released on Wednesday (Feb. 1) the January Manufacturing ISM report on Business which shows that the consumer goods index (PMI) decreased by 1 percentage point to 47.4% from December. A reading below 50% indicates that the manufacturing sector is contracting, while a reading below 48.7% indicates that the overall economy is doing well.

“The historical relationship between the Manufacturing PMI and the economy as a whole shows that the Manufacturing PMI for January (47.4%) corresponds to a -0.5% change in real domestic product (GDP) for the year,” said Timothy Fiore, chairman of the ISM’s Manufacturing Business Review Committee.

According to the January report, new orders and production were agreed. Remains that have been saved. Delivery to retailers was increased. Weapons are increased. Consumer products were at an all-time low. Prices have dropped. Imports and exports fell.

“U.S. manufacturing sectors also contracted, with the Manufacturing PMI at its lowest level since the start of the coronavirus pandemic,” Fiore said. “With the Business Survey Committee’s management reporting the softening of new prices over the past nine months, the January group count shows that companies are slowing down output to better align in the first half of 2023 and plan to grow in the second half of the year.”

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The report shows that the panelists are not planning to reduce the number of people because they are optimistic about the second half of the year.

“The new system standards remain frustrated due to disagreements between buyers and sellers on pricing and delivery times,” Fiore said. “This should be resolved by the second quarter. At the moment, the panelists are trying to maintain the number of people in the period expected to slow down in preparation for success in the second half of 2023. from 85% in December. However, 26% of factories recorded a PMI of less than 45% in January (a strong indicator of industry sluggishness), down from 35% the previous month.

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The following two industries showed growth in January: Manufacturing equipment and miscellaneous transportation.

According to the report, a number of respondents reported that prices have fallen and softened demand. However, other industries are seeing business opportunities.

In the computer and electronics industry, the respondent said, “business is still strong, but we’re starting to see some price softening. And lead times seem to be improving.”

A pharmaceutical industry analyst said, “conditions are good. Products are slightly better than planned. Price pressures are easing on many products. There have been very few supply disruptions so far this year, and fewer are expected in the short term. The crystal ball will remain elusive.” good for the rest of 2023.”

In the food, beverage and tobacco industry, the respondent said, “sales are down (as expected) at the beginning of the year. Forecasts from the sales department show lower sales than we expected. If this is true, the volume of products will increase slightly next month and a half.”

A spokesperson for the transportation equipment company said, “Supply issues continue to disrupt our production schedule. Shipments from our foreign suppliers are also causing delays. Lead times have doubled for critical electronics, gaskets, seals and special metals.”

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A machine operator said, “The high demand for ag continues to increase the demand for parts. Large construction / off-road primary equipment needs strong as well. Creating continued challenges with the supply chain.”

In the electronics, tools and equipment industry, the respondent noted that some of the business sectors are softening globally. But lead times for many products have improved, and prices have come down.

A spokesman for the steel industry said, “the outlook for the first half of 2023 looks very soft. Demand for our products has dropped significantly. Our inventory is high and so are our customers. It seems that everyone wants to fall.”

A representative of the various manufacturers said, “customers are very angry in seeking lower prices, beyond the prices we receive from our suppliers.”

A respondent from the steel industry said that new orders would soon change, while a respondent from the non-ferrous metal industry said, “Industrial infrastructure is strong. Business construction is slow.”


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