PMI rebounds as manufacturing’s fundamentals remain solid
Manufacturing steadied itself to start the new year, as improved demand and continued overall growth boosted the monthly PMI index to 56.6%, an increase of 2.3 percentage points from the December reading of 54.3%.
The PMI, produced by the Institute for Supply Management, had fallen sharply in December, but most of the basic manufacturing fundamentals remains in solidly positive territory as 2019 got started. The New Orders Index and the Production Index, two components of the overall PMI, both were up significantly in January, and the Employment Index registered just a small decline.
“Comments from the panel reflect continued expanding business strength, supported by strong demand and output. Demand expansion improved with the New Orders Index reading returning to the high 50s, the Customers’ Inventories Index remaining too low, and the Backlog of Orders remaining at a near-zero-expansion level,” said Timothy R. Fiore, chairman of the Institute for Supply Management’s Manufacturing Business Survey Committee. “Consumption continued to strengthen, with production expanding strongly and employment continuing to expand at previous-month levels.”
Some of the concerns raised by committee members, particularly the impact of tariffs and exports, continue to be on the minds of committee members, said Fiore. “Exports continue to expand, but at the lowest level since the fourth quarter of 2016. Prices contracted for the first time since the first quarter of 2016,” he said in a press release. “The manufacturing sector continues to expand, reversing December’s weak expansion, but inputs and prices indicate fundamental changes in supply chain constraints.”
Among the comments from committee members:
- “Unlike in the last few years, we are experiencing a first quarter slowdown.” (Paper Products)
- “Steady supply and production environment.” (Computer & Electronic Products)
- “Concerns about oil prices are fueling questions of how strong the economy will be the first half of 2019.” (Chemical Products)
- “Overall, business continues to be good; however, margins are being squeezed.” (Transportation Equipment)
- “We continue to enjoy the benefits of a strong general economy. We are busy and maintain a backlog of sales orders.” (Machinery)
- “Incoming orders have been steady, but we’re starting to see signs of slowing going into February and March.” (Furniture & Related Products)
- “Business conditions are good, and our demand and production are tracking to our forecasted growth levels for the year.” (Miscellaneous Manufacturing)
- “Going to be a very strong spring. Business levels will be just as good [compared to] the same time frame in 2018.” (Fabricated Metal Products)
- “Steel tariffs continue to put upward pressure on prices of downstream materials.” (Petroleum & Coal Products)
- “January is off to a good start versus a lower November and December. We are ahead of both plan and January 2018 performance.” (Plastics and Rubber Products)