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US mfr'g sees some positive light after 26 months of contraction

US mfr'g sees some positive light after 26 months of contraction

Peter Boockvar
Feb 03, 2025
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The January ISM manufacturing index was 50.9, just above the estimate of 50 and finally expressing some level of expansion/optimism after about two years of contraction. It’s the best level since September 2022 and helped by new orders which increased to 55.1 from 52.1 on the heels of inventories falling to a 3 month low. Employment was a bright spot too, rising to 50.3 from 45.4 and the first time above 50 since May of last year. Export orders rose 2.4 pts and is above 50 for a 2nd month. Backlogs remained sluggish though, falling 1 pt to 44.9. Supplier deliveries rose almost 1 pt and is above 50 for a 2nd straight month but around 50 at 50.9. Prices paid rose by 2.4 pts m/o/m to 54.9 which is the highest since May 2024.

Breadth was mixed as 8 of 18 industries saw growth vs 7 seen in December. Eight too experienced a contraction, also vs 7 in the month before. The balance saw no change in their business.

Bottom line, after 26 straight months of below 50 prints, implying manufacturing contraction, we finally see some stabilization. That said, there are still a bunch of things to think about on where we go from here. The obvious is tariffs and its impact, along with the US dollar strength for those exporting but also understanding that at the end of 2024, there was a bunch of ordering and inventory drawdowns (as seen in the Q4 GDP report) as buyers rushed to procure products before the oncoming tariffs. It’s likely that the new orders rise follows that inventory shelf clearing.

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