The manufacturing sector in the United States expanded in January for the second month in a row, according to a report by the Institute for Supply Management (ISM). Out of the 18 major industries in the sector, 13 of them experienced growth in January.
The manufacturing sector had trouble growing throughout 2012 as companies lowered their orders for machinery and equipment. But after two months of increases in orders, Dan Greenhaus, chief global strategist for BTIG LLC, told the New York Times that “there’s a fair bit of optimism here to start the year.”
Greenhaus said that these recent gains in total orders were a very good sign for the economic recovery. “The larger story remains intact, of a moderate, ongoing recovery,” he said.
The ISM’s New Orders Index found a 3.6 percent increase in new orders from 50.2 percent in December to 53.3 percent in January. An index reading of at least 50 percent indicates expansion in the manufacturing sector; below 50 percent indicates contraction.
In addition to an increase in new orders, the report also noted positive indications in production, employment and inventories. The ISM warned readers not to confuse its national report with less far-reaching reports that confine their data to particular regions of the country.
The ISM measured growth in production for the fifth consecutive month. Its Production Index moved from 52.6 percent in December to 53.6 percent in January. This index requires a reading above 51.2 percent to show an increase in terms meeting the Federal Reserve Board’s Industrial Production standards. Inventories in manufacturing went up considerably in January after two months of contraction. ISM’s Inventories Index measured an impressive 8 percent increase from 43 to 51 percent in January.
One of the most scrutinized indicators of economic recovery is employment, and the manufacturing sector showed strong employment figures in addition to its new orders. The New York Times reported that 4,000 new manufacturing jobs were added last month, the fourth consecutive monthly increase. The Employment Index rose 2.1 points to 54 percent. A showing of 50.5 percentage points is required to show growth, as measured by the Bureau of Labor Statistics (BLS).
While most of the manufacturing sector prospered in January, there were some segments that showed contraction. The four manufacturing industries reporting contraction for the month of January were nonmetallic mineral products, computer and electronic products, wood products and chemical products.
The Supplier Deliveries Index showed a small slowdown in January of 0.1 percentage point in delivery performance from suppliers to manufacturers. Another area of weakness was new export orders, which fell one percentage point in January. But the overall picture from the ISM report is of a strong recovery in the manufacturing sector to start the year.
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