from Statista.com
— this post authored by Felix Richter
The U.S. manufacturing sector returned to growth for the first time since July 2019. That’s according to the latest reading of ISM’s Purchasing Managers’ Index (PMI), which edged up to 50.9 percent in January (with values above 50 percent indicating an expansion of manufacturing activity). Likely benefitting from the trade truce between the United States and China, supply chain managers reported a sharp uptick in production and new orders in January, while the subindices for employment and inventories remained in contraction territory.
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The overall growth was limited to eight of the 18 industries covered by the survey however, indicating that the latest uptick is fragile and might be short-lived. Moreover, most of the January responses have likely been submitted before the outbreak of the coronavirus, meaning that the negative effects of the pandemic on economic activity aren’t reflected in the latest reading.
Based on a monthly survey of supply chain executives across 18 manufacturing industries and published by the Institute for Supply Management on the first business day of each month, the PMI is a composite index based on five equally weighted subindices measuring new orders, production, employment, supplier deliveries and inventories. It is widely considered one of the most important economic indicators in the United States. Not only is the PMI indicative of manufacturing activity, but it can also read as an indicator for the overall economy. According to ISM:
“A PMI above 42.8 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 42.8 percent, it is generally declining. The distance from 50 percent or 42.8 percent is indicative of the extent of the expansion or decline.”
For more analysis in the latest PMI data, see January 2020 ISM and Markit Manufacturing Surveys Are In Expansion.
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