US Factory Gauge Climbs to Highest Since 2022
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A measure of U.S. factory activity climbed to a 15-month high at the start of the year, fueled by the strongest orders growth since May 2022 and suggesting manufacturing is starting to stabilize.
The Institute for Supply Management’s manufacturing gauge rose 2 points to 49.1 in January, according to data released Feb. 1. While still below the level of 50 that indicates shrinking activity, the figure exceeded all but one estimate in a Bloomberg survey of economists.
The 5.5-point increase in the orders index marked the largest monthly advance in more than three years, helped by robust demand in the last half of 2023. Production expanded for the first time in four months, while a gauge of customer inventories showed the leanest stockpiles since October 2022.
“This could be the beginnings of growth,” Timothy Fiore, chair of the ISM manufacturing survey committee, said on a call with reporters. “We’ve been waiting for this, and I think we need to get through the quarter to really see it.”
The nation’s purchasing and supply management executives are optimistic about the economy’s prospects as the Federal Reserve has signaled it will lower interest rates this year.
Four industries reported growth in January, including apparel and transportation equipment, while 13 indicated contracting activity.
Fed policymakers on Jan. 31 left their benchmark rate unchanged for a fourth-straight meeting and signaled an openness to cutting it. After the meeting, Fed Chair Jerome Powell dashed investors’ hopes that reductions would begin in March.
The ISM’s survey pointed to remaining hurdles for a recovery in U.S. manufacturing. While domestic demand has been steady, the group’s export orders gauge showed overseas customers are pulling back. The index fell 4.7 points to 45.2 in January, marking the fastest rate of contraction since May 2020.
Price pressures also bubbled up in January. The ISM’s prices-paid index showed materials costs rose for the first time since April.
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