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MAPI: January Factory Slowdown 'Worrisome'

Tue, 02/04/2014 - 9:38am

Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), has offered some insight into the most recent numbers from the Institute for Supply Management (ISM):

“While U.S. manufacturing continued its growth into the new year, survey data from the Institute for Supply Management (ISM) showed that the pace of factory activity slowed considerably. The overall Index fell by 5.2 percentage points from 56.5 in December to 51.3 in January, still signaling overall output advances but at a far more muted pace.

“A number of survey components were worrisome in suggesting a dramatic halting to the acceleration of output growth that manufacturing appeared to be enjoying in the final months of 2013,” he added. “Most notably, the new orders index tumbled by 13.2 percentage points from an unsustainable 64.4 percent in December to 51.2 percent in January, and the production component fell by 6.9 percentage points from 61.7 percent in December to 54.8 percent in January. Further, the backlog of orders, an indicator of the near-term pressure on production, fell below the 50 percent mark, indicating a contraction. This is a decidedly negative sign for near-term manufacturing output gains.

“The recent acceleration in U.S. economic growth along with the slow recovery in the global economy suggest that the most likely path for U.S. manufacturing during 2014 is one of moderate growth,” Waldman concluded. “Nonetheless, the January ISM report is a reminder that risks remain in a post-crisis environment. The recovery in the Eurozone is fragile and potentially flirting with deflationary pressures. China’s slowdown is wider and deeper than many expected. And the turmoil in emerging markets needs to be watched for its potential global impacts.”

Read more about the latest ISM numbers, which showed contracted growth in January.

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