Manufacturing Continues 8-Month Recovery Trend in January 2021 ISM® Report On Business®

It’s expected that there will be a long road to recovery after a black swan event like the COVID-19 pandemic. That’s why many were surprised after the sharp retraction of the manufacturing economy in April 2020, when June saw a rapid bounce back to healthy levels. Then, when we might have expected a dance back and forth between expansion and contraction thresholds, the manufacturing economy stayed the course, stabilizing through the latter half of the year.

Now, in a triumphant statement about the perseverance of domestic manufacturing, the January 2021 ISM® Report On Business® marks the first report of the new year at stable levels — even higher than those in January 2020.

A strong start to 2021

Momentum from 2020 started all the way back in June, when the Manufacturing ISM shot back up from a low of 43.1 points back into expansion territory, at 52.2 points. From there, it was a climb back to pre-COVID-19 levels, with gentle ebbs and flows along a healthy growth track. The January 2021 PMI settled at 58.7, above the average of the past six months.

The January report saw some volatility from individual benchmarks, indicative of further settling. New Orders saw a 6.4-point drop, followed by a 4.0-point drop in production. Meanwhile, prices climbed 4.5 points, flanked by a 2.2-point uptick in imports — both signaling that the industrial recovery extends beyond U.S. borders.

Other benchmarks in the report remained relatively flat, with no real outliers to signal instability. In the case of the January ISM report, regression to the mean is very much a sign of congealing stability.

The keys to stabilization

Several factors herald the healthy plateau of manufacturing’s now-eight-month recovery after COVID-19. The biggest is, of course, the rollout of the COVID-19 vaccine. Several states now have as much as 10% of their population inoculated with the first shot — some with 5% of the population fully vaccinated. As vaccine rollout ramps up, stability across the economy will follow.

Also bolstering manufacturing in the first quarter of 2021 are ISM projections for growth. Early estimates put 15 of the 18 manufacturing sectors tracked by ISM on-track for revenue growth. Executive sentiments echo these projections.

“2020 growth at 5 percent during a very challenging and volatile year. 2021 is expected to bring growth at a 7-percent or even greater pace. Logistics is the critical concern, but we are currently abating risk.” (Electrical Equipment, Appliances & Components)

Finally, there’s the promise of new manufacturing demand in the coming year, coupled with new incentives to promote industry. Predictions of renewables are on the rise, as well as vehicles and heavy equipment — largely thanks to low interest rates. In many ways, the United States is once again flirting with the concept of being a self-sustaining consumer economy, with new emphasis on production at home.

The runway for 2021 and beyond

With 16 of 18 industries in the Manufacturing ISM reporting growth in January, there’s reason to believe this month is only the beginning to a year of strong recovery. And while manufacturing has heralded its own recovery for eight months and counting, the rippling effects of that could bring continued benefits to domestic producers big and small.

2021 is starting off strong for manufacturers. If you’re seeing production ramp up and need equipment services, 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!
Call Now ButtonCall for Help