US manufacturing contracts in January at lesser rate

02 February 2009 16:45  [Source: ICIS news]

US manufacturing continued to contract in JanuaryWASHINGTON (ICIS news)--Major US manufacturing sectors, including chemicals and plastics, continued to contract in January, the Institute for Supply Management (ISM) said on Monday, but the rate of production decline eased last month.

The institute said its closely watched purchasing managers index (PMI) was at 35.6% in January, indicating that the manufacturing sector still was contracting. 

However, January’s PMI also was an improvement over December’s index reading of 32.9% and marked the first upward movement in the measure of manufacturing activity since June last year.

A PMI reading of 50% or higher indicates that manufacturing industries - key downstream consuming sectors of chemicals and resins - are experiencing growth. A reading below 50% means that the broad manufacturing sector is in contraction.

Each month the ISM surveys purchasing executives in 19 key manufacturing sectors on a range of ten economic measures to produce the purchasing managers index.

The PMI has been below 50% for the last 12 months and has fallen from a high in the 48-49% range seen in the first half of 2008 to the mid-thirties since October last year.

“January marked 12 months of contraction in the manufacturing sector,” said Norbert Ore, chairman of the institute’s survey committee.  “However, the rate of decline as measured by the PMI was slower than experienced in December.”

“On a positive note, the prices index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer,” Ore said.

Of the 19 surveyed manufacturing sectors, only textile mills and coal and petroleum products reported growth in January. Chemicals and plastics were among the 17 production industries that reported contraction last month.

Other manufacturing industries showing contraction in January included electrical equipment, appliances, transportation equipment, computers, furniture, machinery and fabricated metals - all important downstream consumers of chemicals and derivative products.

“Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper,” Ore said.

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By: Joe Kamalick
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