The Manufacturing PMI (Purchasing Managers’ Index) is an important economic measure from the Institute for Supply Management (ISM). It shows the health of the manufacturing sector by collecting data from purchasing managers at different manufacturing firms across the U.S. The PMI is a combined index that includes new orders, production, employment, supplier deliveries, and inventories.
The PMI has several important parts that provide insights into the manufacturing sector’s condition. These parts include new orders, which measure the number of new orders manufacturers receive, and production, which looks at the production output rate. Employment assesses changes in job levels within the sector. Supplier deliveries look at the speed of deliveries and any delays, while inventories track changes in stock levels.
Each of these parts is surveyed and weighted to calculate the overall PMI. A PMI above 50 means the manufacturing sector is growing, while a reading below 50 means it is shrinking.
January S&P Global Manufacturing PMI
In January, the US manufacturing sector started growing again, thanks to increased confidence.
Both production and new orders went up, and businesses were optimistic about the future. This optimism was partly due to the belief that business conditions would improve under President Trump. However, input costs continued to rise, leading to higher prices for products.
The S&P Global US Manufacturing PMI rose above 50.0 for the first time in seven months, indicating a modest improvement in the sector’s health. New business increased for the first time since June last year, but export orders still fell slightly. Production volumes grew modestly, marking a turnaround from late 2024.
The new administration boosted business confidence, resulting in the largest monthly improvement in optimism since November 2020, with more than half of respondents expecting manufacturing production to increase over the coming year.
Source: spglobal
January ISM Manufacturing PMI
The Manufacturing PMI in the United States rose to 50.9 in January, up from 49.2 in December, indicating economic expansion for the 57th month. Key highlights include:
- New Orders Index: Increased to 55.1, marking the third month of growth after seven months of contraction.
- Production Index: Rose to 52.5, returning to expansion after eight months of contraction.
- Prices Index: Continued to grow, registering 54.9.
- Backlog of Orders Index: Fell slightly to 44.9, remaining in contraction.
- Employment Index: Increased to 50.3, showing growth.
- Supplier Deliveries Index: Slower deliveries at 50.9.
- Inventories Index: Decreased to 45.9.
- New Export Orders Index: Increased to 52.4.
- Imports Index: Returned to expansion at 51.1.
Overall, U.S. manufacturing activity expanded in January after 26 months of contraction, with improvements in demand, output, and inputs. Challenges include maintaining price stability amid demand growth. Four of the six largest manufacturing industries expanded in January.
Source: ism
Despite facing various challenges, the manufacturing sector is showing signs of growth.
Key industries such as transportation equipment are tightening supply chains due to Chinese restrictions, while aerospace and defense companies are experiencing increasing concerns over supply chain shortages.
Sectors like machinery, fabricated metal products, and primary metals are seeing strong demand and growth, with some industries experiencing unusually high activity levels early in the year. Overall, the sector is optimistic about strong customer demand and higher sales compared to the previous year.
Impacts of Report on Stock Market
The PMI provides insights into the health of the manufacturing sector. This PMI exceeds 50, indicating expansion and increased investor confidence. Additionally, this was a higher-than-expected PMI report, which led to an increase in stock prices and suggests robust economic activity and potential corporate earnings growth. Consequently, the market experienced a significant rebound following the release of these two PMI reports.
