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U.S. Manufacturing PMI Hits Lowest Since May 2020

U.S. manufacturing PMI for January has come in at 47.4%, representing the third consecutive contraction of economic activity in the manufacturing sector, with the petroleum products and coal industry among the 15 showing contractions, according to data released Wednesday by the Institute for Supply Management (ISM).

The U.S. January Manufacturing PMI of 47.4% comes in 1% lower than December’s seasonally adjusted 48.4%, indicating “a second month of contraction after a 30-month period of expansion”, the ISM reported.  

This is the lowest PMI since May 2020, which registered a seasonally adjusted 43.5%.

"The U.S. manufacturing sector again contracted, with the Manufacturing PMI® at its lowest level since the coronavirus pandemic recovery began,” ISM Chair Timothy Fiore said in a press release.

“With Business Survey Committee panelists reporting softening new order rates over the previous nine months, the January composite index reading reflects companies slowing outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year,” Fiore added.

ISM’s Production Index came in at 48%, or 0.6% lower than December, while the Prices Index came in at 44.5%, or 5.1% higher than December. The Backlog of Orders Index, the Employment Index and the Supplier Deliveries Index were all slightly higher than December but still in contraction territory. The Inventories Index for January was 50.2%, down 2.1% from December.

Overall, new orders and production are contracting further, along with backlogs, while supplier deliveries and raw materials inventories have sped up. The ISM noted that customers’ inventories were “too low”, though exports and imports continue to contract.

ISM warned that demand eased in January, with the New Orders Index “contracting strongly” and the New Export Orders Index “still below 50 but improving”.

Fiore also said that "New order rates remain depressed due to buyer and supplier disagreements regarding price levels and delivery lead times; these should be resolved by the second quarter.”

Of the six biggest manufacturing industries, only one–Transportation Equipment–registered growth in January. 

A total of 15 industries reported contraction in January, including Petroleum & Coal Products, according to ISM.

By Josh Owens for Oilprice.com

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