ISM Manufacturing Index: The Institute for Supply Management’s manufacturing index moved down 2.1% (m/m) to 47.4 for January 2023; this value is weaker than the forecast of 50.  The new orders sub-index scored at 42.5. The reading pointed to the third consecutive contraction in factory activity as companies slowed outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year.

The ISM manufacturing index is based on surveys of 300 purchasing managers in 17 industries. The survey is a diffusion index calculated as a percent of responses. A value of 50 is neutral, while less than 50 denotes contracting manufacturing activity and greater than 50 denotes expanding activity.

Figure 1 breaks down the composite index and sub-indexes. The backlogs sub-index was 43.4 this month, while the inventories sub-index was 50.2.

The two manufacturing industries that reported growth in January are: Miscellaneous Manufacturing; and Transportation Equipment. The 15 industries reporting contraction in January, in the following order, are: Wood Products; Textile Mills; Paper Products; Furniture & Related Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Machinery; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Computer & Electronic Products.

“In the past two weeks, we are seeing a slowing of new orders.” [Primary Metals]

At Gerdau, we closely monitor the ISM manufacturing index since it is an excellent barometer of the present strength, as well as a window on the likely short-run future, of U.S. manufacturing.