Although the manufacturing sector continued to grow in January, it didn't grow as fast as it did in previous months. The Markit US Manufacturing Purchasing Managers Index (PMI) hit a high of 55.0 in December, but it dropped to 53.7 in January. The output subindex hit a four-month low of 53.5, which some experts attribute to the bitter cold temperatures and inclement weather in several regions of the United States. The number of new export orders also declined in January. Despite the slowdown, the manufacturing sector has expanded eight months in a row.
The PMI published by the Institute for Supply Management was slightly lower than Markit's PMI for January. Based on new orders, US manufacturing employment, production, supplier deliveries, and inventories, ISM's January PMI came in at 51.3. US manufacturing employment, production, and new orders all showed growth, but supplier deliveries slowed and inventories contracted during the month of January. Manufacturing professionals who responded to ISM's survey indicated they had trouble shipping finished goods and getting shipments of raw materials because of the bad weather.
New orders fell by 13.2 percentage points from December to January, and production dropped by 6.9 percentage points. Supplier deliveries had a slight gain of 0.6 percentage points during the same period. Eleven of the eighteen US manufacturing industries reported growth during January, including primary metals, wood products, textile mills, plastics and rubber products, electrical equipment, and fabricated metal products. Several commodities related to these industries, such as plastic resins and wood, have gone up in price. The industries reporting contraction for January include apparel, petroleum and coal products, paper products, and chemical products.
Some analysts have been predicting a manufacturing renaissance for years, but it doesn't look like it will be happening during the first quarter of 2014. Experts in the chemical products industry say margins are low, which makes it tough to run a profitable business. In the ISM survey, respondents from chemical and petroleum products companies said bad weather was responsible for the contraction in their industries. The government shutdown, which occurred in October 2013, is still having an effect on US manufacturing. Some companies are having trouble shipping orders and maintaining adequate inventory levels because government agencies were not certifying products during the shutdown.
The US manufacturing industry is growing, but it's not growing as quickly as it should. Increased fuel costs, higher commodity prices, and inclement weather are all having an effect on production, shipping, and new orders. The winter weather is far from over, so it will be interesting to see whether manufacturers report the same difficulties for February as they did in January. The only way the US manufacturing industry will improve is if manufacturing companies hire skilled employees and focus on innovation for the future.
(Photo courtesy of freedigitalphotos.net)
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