January 2024 Manufacturing ISM Report On Business Reports Backlog of Orders Continues to Contract

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 15th consecutive month following one month of “unchanged” status (a PMI reading of 50 percent) and 28 months of growth prior to that, 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 49.1 percent, up 2 percentage points compared to December’s seasonally adjusted reading of 47.1 percent. This is the highest reading since October 2022, when the PMI registered a seasonally adjusted 50 percent. This is the 15th month of contraction.

ISM’s New Orders Index expanded for just the second time in 20 months in January, registering 52.5 percent, an increase of 5.5 percentage points compared to December’s seasonally adjusted reading of 47 percent. The New Orders Index contracted in July 2022, registered a seasonally adjusted 50.1 percent in August 2022 and had been in contraction since September 2022.

The Production Index moved back into expansion territory in January, registering 50.4 percent, 0.5 percentage point higher than the seasonally adjusted December reading of 49.9 percent. The Production Index has been in contraction in 10 of the last 14 months; in addition to this month, the index registered 50 percent or better in May, September, and October 2023.

ISM’s Employment Index registered 47.1 percent in January, 0.4 percentage point lower than the seasonally adjusted December reading of 47.5 percent. The index indicated employment contracted for the fourth month in a row (and at a faster rate in January) after one month of expansion and three months of contraction before that.

Delivery performance of suppliers to manufacturing organizations was faster for the 16th straight month in January, as the Supplier Deliveries Index registered 49.1 percent, 2.1 percentage points higher than the 47 percent reported in December.

The Inventories Index registered 46.2 percent in January, 2.3 percentage points higher than the seasonally adjusted 43.9 percent reported in December. Manufacturing inventories contracted at a slower rate compared to the previous month.

ISM’s Backlog of Orders Index registered 44.7 percent, a 0.6-percentage point decrease compared to December’s reading of 45.3 percent, indicating order backlogs contracted for the 16th consecutive month after a 27-month period of expansion.

The four manufacturing industries reporting growth in January are: Apparel, Leather & Allied Products; Textile Mills; Transportation Equipment; and Chemical Products. The 13 industries reporting contraction in January — in the following order — are: Wood Products; Machinery; Plastics & Rubber Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Paper Products; Miscellaneous Manufacturing; and Primary Metals.