Subscribe to our free, weekly email newsletter!


Manufacturing activity begins 2013 on a solid note, reports ISM

The PMI, the index used by the ISM to measure manufacturing activity, was 53.1 in January, which tops December by 2.9 percent.
By Jeff Berman, Group News Editor
February 01, 2013

Manufacturing growth began 2013 on a strong note in January, according to the January Manufacturing report on Business from the Institute for Supply Management (ISM).

The PMI, the index used by the ISM to measure manufacturing activity, was 53.1 in January, which tops December by 2.9 percent. A reading of 50 or higher indicates growth is occurring, and the PMI has now been over the 50 mark for the last two months. Economic activity in the manufacturing sector had expanded for 34 straight months prior to contraction in June and overall economic activity has expanded for 44 straight months, according to ISM.

Including the PMI, the report’s four key metrics all were healthy in January.

New Orders, which are commonly referred to as the ‘engine’ which drives manufacturing, were up 3.6 percent at 53.3 and remain in growth territory and are above 50 for the fifth straight month—in terms of overall growth—following three months of contraction. Production was up 1.0 percent to 53.6, while Employment rose 2.1 percent to 54.0.

“We are pleasantly looking at some very solid numbers across the board,” said Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Manufacturing Business Survey Committee, in an interview. “All of the report’s key metrics are above 50 and feeding into the total PMI and beating estimates. That is a pretty good way to start 2013.”

This data comes at a time when employment numbers are getting some decent traction and the housing market continues to improve as well, with other various facets of the economy trending in the right direction, such as automobile sales.

Holcomb said in order for that trend to continue there needs to be support and cooperation from the global economy and in Washington, D.C., too, as there are immediate issues like the debt ceiling and long-term ones such as the U.S. deficit that need to be addressed.

And while the Fiscal Cliff talks came to an agreement at the beginning of the year, the subsequent impact U.S. households seeing an increase in payroll taxes and a decrease in take home pay remains to be fully seen and is a concern of manufacturers.

January Inventories jumped up 8.0 percent to 51.0, and Supplier Deliveries fell 0.1 percent to 53.6.

“Supplier Deliveries above 50 represents slower deliveries, which is a good thing because it shows tightness in the supply system and shows that suppliers need to build inventory and perhaps add jobs to keep up and support manufacturing,” said Holcomb. “It is a positive for PMI.”

Regarding Inventories, he explained that at year-end companies work very hard to reduce their inventories so their books look as good as possible at that time, noting that adding inventory in January is not unusual.

What’s more, he said that increased inventory in January can be viewed as a solid response to New Orders and production requirements.

Prices in January headed up 1.0 percent to 56.5. Prices heading up early in the year are standard, said Holcomb, as suppliers come in and try to float increases. He added that ISM maintains prices will not rise significantly throughout the year.

Backlog of Orders fell 1.0 percent to 47.5. The combination of high New Orders and order backlog being close to 50 is encouraging, according to Holcomb.

Given some of the positive economic headwinds early into 2013 compared to recent years, Holcomb said the outlook in the manufacturing sector is encouraging.

“Looking at data from 2008-2012, it shows that January in each year was always up relative to the prior December, with February down at least a little bit,” he said. “Even with the positive signs, there are things to keep an eye on and we are positive about 2013.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The Department of Commerce reported that January retail sales were up 0.2 percent compared to December and up 3.7 percent annually at $449.9 billion, and the NRF reported that January retail sales, which exclude automobiles, gas stations, and restaurants, rose 0.6 percent over December and 1.4 percent compared to January 2015.

On the freight shipments side, Cass reported that January shipments––at 1.025––trailed December by 1.3 percent and January 2016 by 0.2 percent. These declines were less than the 4.9 percent drop from November to December, though, and January shipments still topped the 1.0 mark for the 65th straight month in December.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that its Freight Transportation Services Index (TSI) saw a 0.4 percent decline from November to December, its second straight decline on the heels of a 1.0 percent decrease from October to November.

Carloads saw a 11.7 percent annual decline at 241,680, and intermodal containers and trailers rose 10.5 percent to 262,830

An amendment to the International Maritime Organization’s Safety of Life at Sea convention will go into effect requiring all shippers (importers and exporters) to certify and submit the Verified Gross Mass – the combined weight of the cargo and the container – to the steamship line and terminal operator in advance of loading the container aboard a vessel.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2016 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA