ISM Manufacturing Index (PMI) Continues Boom as New Orders Just Keep Coming

The Institution for Supply Management (ISM) Manufacturing Index (PMI) continued to show extraordinary strength with a reading of 59.1% in January. Worth noting, with the employment index pulling the headline reading down slightly, the concern for overheating is real.

New orders continued to rage on at 65.4%, though that’s a decrease of 2% from the seasonally adjusted December reading of 67.4%. The Production Index registered 64.5%, a 0.7% decline from the seasonally adjusted reading of 65.2% the month prior.

The Employment Index registered 54.2%, a notable decline of 3.9% from the seasonally adjusted December reading of 58.1%. That could signal that the sample of manufacturers are having a hard time finding enough people to keep up production.

Of the 18 manufacturing industries, 14 reported growth in January in the following order: Textile Mills; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Machinery; Transportation Equipment; Apparel, Leather & Allied Products; Chemical Products; Computer & Electronic Products; Paper Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products.

Four industries reported contraction during the period: Printing & Related Support Activities; Wood Products; Furniture & Related Products; and Nonmetallic Mineral Products.

“Comments from the panel reflect expanding business conditions, with new orders and production maintaining high levels of expansion; employment expanding at a slower rate; order backlogs expanding at a faster rate; and export orders and imports continuing to grow faster in January,” Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee said.

“Supplier deliveries continued to slow (improving) at a faster rate,” he added. “Price increases occurred across all industry sectors.”

PANEL RESPONDENTS SAID

• “Sales nationally and internationally are strong in Q1. We are increasing our CapEx spend by 30 percent to 40 percent over [the] previous year.” (Chemical Products)
• “We have heard reports of additional business due to the recent reduction of tax rates.” (Machinery)
• “Business outlook is positive on all fronts right now with our customers. Budgets are being approved for new projects, and component prices from suppliers have temporarily stabilized.” (Computer & Electronic Products)
• “Our usual winter slowdown has not occurred, and we are very busy with new orders.” (Furniture & Related Products)
• “Slow start to 2018; pricing on metals is heading up and quotes/orders are picking up as well.” (Fabricated Metal Products)
• “Overall, business remains steady. With several key programs to begin ramping up in the industry, outlook looks good for calendar year 2018.” (Transportation Equipment)
• “Employment is very tight in our area.” (Food, Beverage & Tobacco Products)
• “Business continues to strengthen.” (Paper Products)
• “Business is starting the new year strong. Consumer confidence seems to be driving a lot of our customers’ order requirements higher.” (Plastics & Rubber Products)