January 2019 Manufacturing ISM® Report On Business® Signals a Strong Start to 2019

The first Manufacturing ISM® Report On Business® is out for 2019, and the numbers look better than they did in the fourth quarter of 2018. Overall PMI® is up 2.3%, to 56.6% in January, showing economic growth for the 117th consecutive month.

While the economy is still in growth mode, the start of a new year means new predictions and projections for how long it will continue. We’re breaking down the report to see if the positives will continue amid political uncertainty and growing global demand.

Spotlighting the positives

A few key manufacturing variables saw big jumps in the new year, including new orders, which ticked up 6.9%. Following in tandem, production also rose 6.4% in January, signaling a healthy response to demand. Fueling this push were prices, which clocked in 5.3% lower than they were in December 2018. These core drivers have set the first quarter of 2019 on a positive trajectory to exceed analyst expectations.

Among other positives from the report are increases in customers’ inventories (1.1%) and a stabilizing of backlogged orders (up 0.3%).

Stabilization or artificial improvement?

It’s too early in 2019 to make bold predictions for the year ahead, so naturally, there are opinions forming about the uptick in numbers for the new year. While some are praising the end of a rocky period of uncertain headwinds, many are wondering if the surge into 2019 is the result of a conservative December. Surveying the past 3-, 6-, and 12-month periods yields some insight.

Examining the fourth quarter of 2018, the average PMI® was 56.8%, falling right in line with January’s number. And, while January is up from December, it hasn’t reached November’s 58.8%, largely due to the turmoil leading up to the government shutdown that lasted through January.

Going back six months, PMI® averaged 58.2%, putting January a notch below. And, going back a full year, the average sits at 58.5%. This tells us that during the first and second quarter of 2018, the manufacturing economy was generally consistent, while during the latter half and especially during the fourth quarter, it began to decline. With January’s average higher than December’s 12-month low, the data suggests we’re not out of the woods yet.

Riding the tides of optimism

Despite uncertain numbers, manufacturer sentiment is generally good about forward-looking prospects. Voices from around the manufacturing industry offer positivity and praise for the coming quarter:

“Business conditions are good, and our demand and production are tracking to our forecasted growth levels for the year.” (Miscellaneous Manufacturing)

“Going to be a very strong spring. Business levels will be just as good [compared to] the same time frame in 2018.” (Fabricated Metal Products)

“We continue to enjoy the benefits of a strong general economy. We are busy and maintain a backlog of sales orders.” (Machinery)

It’s unknown if the upward trend in new orders and production will continue, but forecasters are certainly planning as if they will. With global economic growth currently projected at 3.7% by the World Economic Outlook (WEO), the United States will need to have a strong year to sustain the growth seen in January.

Need help keeping your equipment in top working condition to satisfy an uptick in production demands? You can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!

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