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January ISM Manufacturing Showed a Mixed Picture

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ISM manufacturing rose by 0.2 points in January

The manufacturing sector accounts for about 12% of the US economy. According to the ISM (Institute for Supply Management), the manufacturing PMI (purchasing managers’ index) was 48.2 in January—a rise of 0.2 points from the downwardly revised December reading of 48.0.

With manufacturing staying in a contraction, the Industrial Select Sector SPDR ETF (XLI) and the SPDR Dow Jones Industrial Average ETF (DIA) fell by 6.7% and 5.8%, respectively, over the past month as of February 2.

Industrial stocks including Emerson Electric (EMR), General Electric (GE), Honeywell International (HON), and Rockwell Automation (ROK) fell by 3.1%, 8.0%, 1.9, and 8.7%, respectively, over the same period.

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Manufacturing grew in January

In January, out of the 18 industries, eight industries reported an expansion and seven industries reported a decline.

New orders and production expanded in January. New orders rose to 51.5. They rose by 2.7 points in January. Production inched to 50.2 in January.

Employment fell more in January

Employment continued to fall. It fell to 45.9 in January. With the decline in commodity and energy prices, petroleum and coal producers reported a decrease in the workforce.

Also, the prices that manufacturers paid for supplies stayed lower at 33.5 in January. Even inventories with manufacturers and customers didn’t change in January.

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Exports fell in January

The US dollar appreciated against world currencies. It makes imports cheaper for the US. In contrast, US manufacturers lose competitiveness in the foreign market. As a result, exports fell to 47.0 in January. Imports rose by 5.5 points to 51.0 in January.

Markit US PMI rose by 1.2 points in January

While the ISM manufacturing fell, the Markit US PMI stood at 52.4—an increase of 1.2 points in January. It highlighted weakness in export orders and lower inflationary pressure in the economy.

Although divergent, ISM and Markit are indicating that manufacturing is facing challenges due to the fall in export orders and low price levels.

With industrial employment staying lower, let’s see how it impacts personal income and consumption in the economy.

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