January’s Purchasing Managers’ Index showed the slowest pace of growth in more than a year, according to IHS Markit. NAM Chief Economist Chad Moutray broke it down for us.
Topline numbers: “The IHS Markit Flash U.S. Manufacturing PMI slowed for the sixth straight month, down from 57.7 in December to 55.0 in January, the slowest pace of growth since October 2020,” said Moutray. “Growth in new orders (down from 56.3 to 53.0) and output (down from 53.6 to 50.3) both expanded at the weakest paces since the summer of 2020, with exports (down from 51.3 to 50.4) slowing to near neutral. Hiring (down from 53.9 to 49.6) declined for the first time since July 2020. More encouragingly, survey respondents felt more optimistic about future production over the next six months, with the forward-looking index up from 75.8 to 77.6.”
Supply chain struggles: “Manufacturers in the U.S. continued to cite supply chain bottlenecks and workforce shortages as significant challenges to growth, with the spread of the omicron variant also likely impacting these data,” said Moutray. “Supplier delivery times (down from 23.2 to 23.1) remained near historic levels, speaking to the supply chain bottlenecks described above. Measures for input (down from 81.8 to 80.1) and output (down from 69.5 to 68.5) prices both decelerated in January but remained very elevated and not far from recent record highs.”
Across the pond: “Meanwhile, the IHS Markit Flash Eurozone Manufacturing PMI rose from 58.0 in December to 59.0 in January, the best reading since August,” said Moutray. “New orders, output, exports and employment accelerated, beginning the new year on a positive note despite ongoing challenges with supply chain disruptions and the increased spread of the omicron variant. Manufacturers remained optimistic about production over the next six months, with that measure improving to the strongest pace since June. On the topic of supply constraints, delivery times continued to be very long. In January, input costs eased slightly, but output prices picked up; both price indices remained not far from record rates of growth.”
- The breakdown: “The Eurozone composite manufacturing index was buoyed by stronger expansions in Germany, which also reported the strongest sentiment since August,” said Moutray. “In contrast, activity softened in both France and, outside the Eurozone, in the United Kingdom despite increased output in both markets. Raw material costs eased slightly in all three markets but hovered near record levels.”