MNI INTERVIEW: US Manufacturing Rebound Not Yet A Trend - ISM

U.S. manufacturing activity is still on shaky ground despite the first month of expansion in a year and a sharp rebound in new orders that could be temporary, Institute for Supply Management manufacturing chair Susan Spence told MNI.

"A fair number of comments said customers are restocking the shelves after the holiday, and then there was a little bit about avoiding the next round of tariff threats and tariff circus," Spence said. "If it really is a replenishment thing and post holiday ordering customer inventory is so low, then maybe what we're going to see is you have this nice uptick but that's it. And it gets weeded down." 

The ISM manufacturing chief said that despite the strong January report, she does not have confidence that the PMI will remain above 50 in coming months. "In any other time it would, but it doesn't yet," she said, wanting to see a couple more months of increased demand. "The commentary, the sentiment, and the confidence has been so consistently bad that this report doesn't yet give me confidence."

The ISM manufacturing index increased by 4.7pt to 52.6 in January, well above consensus expectations for a smaller increase, returning to expansionary territory for the first time in 12 months. The composition of the report was strong, with gains in the new orders, production, and employment components.

WEATHERING DISRUPTIONS

Survey respondents' commentary however were somewhat at odds with the improvement in the index. There are positive signs for the start of the year, but they are tempered by indications that January is a reorder month after the holidays, Spence said. 

"There's arguments to be made for both sides," she said. But "I am glad we have an underlying strong economy because we're weathering" trade disruptions. 

New orders surged 9.7pt to 57.1, the highest since February 2022. Production jumped 5.2pts to 55.9, and the backlog of orders increased 5.8 points to 51.6. The new export orders component increased 3.4pts to 50.2. The prices paid measure increased 0.5pts to 59.0.

The employment subindex rose 3.3pt to 48.1, still in contraction territory. "Companies not hiring, holding with who they have -- that's worrisome, too. Does it mean that we're going to have a huge uptick in the unemployment? I don't think so. But the longer term decisions in these companies to hire more people, that's not yet happening because they're not confident."

Of the six largest manufacturing industries, five expanded in January, said Spence.