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KPI – February 2024: State of Manufacturing

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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%) and 28 months of growth prior to that, say the nation’s supply executives in the latest Manufacturing ISM Report On Business.

The Manufacturing PMI registered 49.1% in January, up 2 percentage points from the seasonally adjusted 47.1% recorded in December.

“The U.S. manufacturing sector continued to contract, though at a marginal rate compared to December. Demand moderately improved, output remained stable and inputs are accommodative,” says Timothy R. Fiore, CPSM, C.P.M., chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee.

While demand remains soft, Fiore notes minor signs of improvement. Production execution is stable compared to December, as panelists’ companies continue to manage outputs, material inputs and labor costs.

Overall, suppliers continue to have capacity, he points out. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in January, which is down from 84% a month prior.

“More importantly, the share of sector GDP registering a composite PMI calculation at or below 45% – a good barometer of overall manufacturing weakness – was 27% in January, compared to 48% in December and 54% in November,” he says.

KPI – February 2024: State of Manufacturing | THE SHOP

Caption: Ford’s F-Series was crowned the sales leader in 2023, with a 15% year-over-year increase. According to Car and Driver, Ford also disclosed that 24,165 of its unit sales were electric F-150 Lightning pickups.

Important Takeaways, Courtesy of the Manufacturing ISM Report on Business:

  • Demand moderated, with the (1) New Orders Index expanding at a respectable rate; (2) New Export Orders Index in a headwind; and (3) Backlog of Orders Index remaining above 40% but still in fairly strong contraction territory at 44.7%.
  • The Customers’ Inventories Index contracted further, becoming more accommodative for future production.
  • On balance, Output (measured by the Production and Employment indexes) expanded slightly, with a combined 0.1-percentage point upward impact on the Manufacturing PMI calculation. Panelists’ companies maintained production levels month over month and continued headcount reductions in January, with significant layoff activity.
  • Inputs – defined as supplier deliveries, inventories, prices and imports – continued to accommodate future demand growth but are showing signs of stiffening.
  • The Supplier Deliveries Index indicated faster deliveries for the 16th straight month.
  • The Inventories Index moved upward while remaining in moderate contraction territory.
  • The Prices Index climbed into expansion (or “increasing”) territory as new pricing levels for 2024 went into effect.

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