U.S. ISM Manufacturing Index (January 2023)

Andrew Hencic, Senior Economist | 416-944-5307

Date Published: February 1, 2023

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ISM shows U.S. manufacturing sector contracted for a third month in a row

  • The January ISM manufacturing index registered 47.4, slightly below expectations calling for a 48.0 print. The index fell 1.0 percentage point (pp) from December's reading of 48.4.
  • New orders fell 2.6 pp to 42.5, while new export orders slowed their decline, rising to 49.4. 
  • The backlog of orders sub-index rose to 43.4, up 2.0 pp from December's 41.4 print.
  • The production index fell 0.6 pp to 48.0, extending its decline, while the employment index edged down 0.2 pp to 50.6.
  • The supplier deliveries sub-index rose to 45.6 from 45.1 in December. 
  • Only two (miscellaneous manufacturing & transportation equipment) of 18 manufacturing industries reported growth in January.  

Key Implications

  • Further manufacturing weakness came as no surprise as the momentum from slowing consumer goods demand continues to feed through to producers. The combination of changing preferences and higher financing costs have weighed on new orders as they have now contracted in six of the past seven months.
  • Looking forward, despite the Fed moving into the final stages of its fight against inflation with another hike today, the full effects of this past year's tightening will continue to be felt for months. December's real consumer expenditure data showed goods demand declined for a second consecutive month – touching its lowest level of the year. This trend looks set to continue as our tracking shows GDP growth slowing to less than 1% in the first quarter of 2023.