January 2023 Manufacturing ISM Report On Business Indicates Order Backlogs Contracted for the Fourth Consecutive Month

The Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management (ISM), the largest supply management organization in the world, as well as one of the most respected. Economic activity in the manufacturing sector contracted in January for the third consecutive month following a 28-month period of growth, say the nation's supply executives in the latest Manufacturing ISM Report On Business

The U.S. manufacturing sector contracted in January, as the Manufacturing PMI® registered 47.4 percent, 1 percentage point below the seasonally adjusted reading of 48.4 percent recorded in December. This is the third month of slow contraction and the continuation of a downward trend that began in June 2022.

ISM’s New Orders Index contracted for the fifth consecutive month in January, registering 42.5 percent, a decrease of 2.6 percentage points compared to December’s seasonally adjusted reading of 45.1 percent.

The Production Index registered 48 percent in January, 0.6 percentage point lower than the seasonally adjusted December reading of 48.6 percent, indicating a second month of contraction after 30 consecutive months of growth.

ISM’s Employment Index registered 50.6 percent in January, 0.2 percentage point lower than the seasonally adjusted December reading of 50.8 percent. The index indicated employment expanded weakly for a second month in a row after contracting for three months.

The delivery performance of suppliers to manufacturing organizations was faster for a fourth straight month in January, as the Supplier Deliveries Index registered 45.6 percent, 0.5 percentage point higher than the 45.1 percent reported in December.

The Inventories Index registered 50.2 percent in January, 2.1 percentage points lower than the seasonally adjusted 52.3 percent reported for December. Manufacturing inventories expanded at a slower rate compared to December.

ISM’s Backlog of Orders Index registered 43.4 percent in January, a 2-percentage point increase compared to December’s reading of 41.4 percent, indicating order backlogs contracted for the fourth consecutive month after a 27-month period of expansion.

The two manufacturing industries that reported growth in January are: Miscellaneous Manufacturing; and Transportation Equipment. The 15 industries reporting contraction in January, in the following order, are: Wood Products; Textile Mills; Paper Products; Furniture & Related Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Machinery; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Computer & Electronic Products.