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Economy in Brief

ISM Manufacturing Index Declines in January
by Tom Moeller  February 1, 2022

• Index falls to lowest level since November 2020.

• New orders & production decline sharply.

• Prices paid strengthen.

The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity declined to 57.6 during January from 58.8 in December, revised from 58.7. Earlier figures were slightly revised. A level of 57.9 had been expected in the Action Economics Forecast Survey. During the last 15 years, there has been a 42% correlation between the composite index and the quarterly change in real GDP.

The new orders index weakened to 57.9 in January from 61.0 in December. The level was down from a high of 67.4 in December 2020. Twenty-five percent (NSA) of respondents reported higher new orders versus 37.0% a year ago. The production index fell to 57.8 from 59.4 in December. It was the lowest level since June 2020. The supplier delivery series slipped to 64.6 last month from 64.9, indicating quicker product delivery speeds. The inventories index eased to 53.2 from 54.6 in December.

The employment index rose to 54.5 in January from 53.9 in December. It was the highest level since March 2021. An increased 19.2% (NSA) of respondents reported more hiring versus 13.9% in January of last year while 15.1% reported a decline in jobs, up from 13.8% twelve months earlier.

The prices paid index improved to 76.1 in January after falling sharply during the prior two months. The index remained well below the June 2021 high of 92.1. Fifty-nine percent (NSA) of respondents reported higher prices versus 64.3% last year while 6.5% reported price declines after none did last January.

In other ISM series not included in the composite, the order backlog figure fell sharply to 56.4 (NSA) in January and remained well below the high of 70.6 in May of last year. The new export measure was stable at 53.7 but remained down from a November 2020 high of 57.8. The imports index rose to 55.1 in January from 53.8 in December.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's USECON database; further detail is found in the SURVEYS database. The expectations number is available in Haver's AS1REPNA database.

ISM Mfg (SA) Jan Dec Nov Jan '21 2021 2020 2019
Composite Index 57.6 58.8 60.6 59.4 60.6 52.5 51.2
 New Orders 57.9 61.0 61.4 63.5 64.3 54.0 51.2
 Production 57.8 59.4 60.2 62.0 61.0 53.7 51.2
 Employment 54.5 53.9 53.0 52.3 52.8 44.3 50.9
 Supplier Deliveries 64.6 64.9 72.2 68.2 72.8 61.6 52.9
 Inventories 53.2 54.6 56.3 50.9 52.2 48.8 49.8
Prices Paid Index (NSA) 76.1 68.2 82.4 82.1 83.8 54.0 49.1
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