The manufacturing industry is inching back towards growth mode, with demand rebounding in January.
The Institute for Supply Management’s Purchasing Managers’ Index registered at 49.1% in January, up from 47.4% in December. A reading above 50.0% indicates the industry is in economic growth.
The improvement was buoyed by new orders, which rang in at 52.5%, up 5.5 percentage points from December.
While export levels saw a sharp decline month-to-month, down 4.7 percentage points from December to 45.2%, the industry’s overall health is headed in a good direction, Timothy Fiore, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee.
Fiore highlighted stable revenue and output activity over the past month as other indicators of improvement in the market.
"I think we're probably in the beginning of a demand growth cycle," Fiore said on a call Thursday. "We're waking up and we're ready to start running again."
Fiore attributed some of the demand growth in January to suppliers beginning to increase production as they've been depleting inventories in recent months. However, he maintained that the industry as a whole still isn't likely to move into growth territory until March.
The S&P Global PMI Index recorded an even more enthusiastic January, with a reading of 50.7, the first time the industry saw improvement since April 2023. Like ISM, S&P Global attributed the expansion to a rise in new orders, though it noted some slowdown due to long lead times and weakened supplier performance.
"Manufacturers have started the year with a spring in their step. Business optimism about the year ahead has surged to its highest since early 2022 thanks to a jump in demand. New orders are rising at a pace not seen for over a year and a half, improving especially sharply for consumer goods as households benefit from signs of an easing in inflation and looser financial conditions," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said in a statement.
Unlike demand, prices saw less improvement in the past month, driven by inflated transportation, supplier and fuel costs, according to S&P Global.
The two indices diverged over employment performance. S&P Global noting that payrolls improved marginally in January, while ISM reported a slight drop to 47.1%.
While employers are still using layoffs and attrition to manage headcount as needed, Fiore noted that may slowly change in the months ahead, with manufacturers phasing in new hiring plans over time as the market continues to improve.
"I don't think anyone is seeing dramatic growth which would require a dramatic increase in employment," Fiore said. "It's going to be a slow growth."