U.S. ISM Manufacturing Index (January 2025)

The ISM manufacturing index flips into expansion in January

• The ISM Manufacturing Index rose to 50.9 in January from 49.2 last month, and ahead of the 50 expected. The manufacturing sector reported an expansion for the first time since October 2022.
• Eight of 18 industries reported growth for the month – up from seven in December. Building on momentum from prior months, 43% of manufacturing GDP reported a contraction in January, down from 52% in December and 66% in November.
• Demand conditions improved again. The new orders index improved and reported its third consecutive expansion (55.1), while new export orders (52.4) growth picked up again. Backlog of orders shrank at a faster pace than in December (44.9 vs. 45.9) but came in a month with a notable improvement in production.
• The production index gained again, extending its gain into expansion territory (52.5 from 49.9). Employment took a big step forward (50.3) opening 2025 with its first monthly gain since May 2024.
• Price gains accelerated again last month (54.9), registering their fourth consecutive month of gains.  

Key Implications

• The manufacturing sector started off the year on the right foot with improving demand conditions. However, uncertainty about tariff impacts is very high, making for a cloudy outlook.
• Conditions are very fluid at the moment with Mexico's president suggesting that tariffs on Mexico could be delayed by a month. Any broader delays on tariffs could materially affect the outlook for the sector.  

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