Manufacturing PMI Starts 2024 Strong
As we enter 2024, the manufacturing sector appears to be off to a solid start — at least according to the January 2024 Manufacturing ISM Report On Business. Key metrics within the report suggest industry is on a positive trajectory, coming off a year of downtrends and stagnation. While a month of data is hardly enough to promise an upturn, it certainly bodes well compared to the early-year pullback originally anticipated.
A closer look at the numbers
The Manufacturing PMI ticked up two points in January 2024, climbing up to a series index of 49.1 from 47.1 in December. Half of the metrics comprising the PMI were up, and those movers and shakers were enough to pull the overall manufacturing economy back up near the point of expansion.
The highlight of January’s report was undoubtedly a 5.5-point uptick in new orders, which was enough to push the metric into expansion territory. Production rose just half of a point, and it too landed in expansion range, signaling strength for the first time in months. Imports, inventories, and supplier deliveries were also up.
Opposite the positive gains highlighted in January’s report are several abject trends worth monitoring — namely, a massive uptick of 7.7 points in prices propelled by increases in the cost of aluminum, steel, polypropylene, plastics, and labor. New export orders also suffered a 4.7-point dip, raising questions about trade imbalance in import-export numbers to start the year.
Contextualizing January’s optimistic start
A positive climb in the manufacturing PMI isn’t what most people expected to kick off 2024. Generally speaking, we’re seeing the overall economy performing better than expected.
While supply and demand remain healthy, manufacturing has found stability. As regulations bring inflation under control and the labor market outperforms expectations, growth and stability in manufacturing is generating growth across many industries. As one executive in the machinery sector explains, “We expect to see steady sales going forward, if the [U.S. Federal Reserve] continues to hold rates and suggests a rate cut in the future.” It’s a prediction we can already see coming to fruition.
Looking at manufacturing around the world
Not every country’s manufacturing economy buoyed to kick off the year. In fact, China’s manufacturing sector continued to contract, driven largely by cyclical and seasonal factors. Liquidity issues and a precarious real estate market signal more potential problems on the horizon for China. In the same way economic outperformance has bolstered manufacturing in the U.S., economic underperformance in China stands to stunt a potential manufacturing recovery.
Similarly, the United Kingdom expects hardship in 2024. In late 2023, the country’s primary manufacturing trade body cut its forecast for the sector’s growth. Since then, the UK’s manufacturing PMI fell to 46.2 in December and is expected to linger in that range in light of figures reported for early 2024. The news is attributed to weak demand and economic activity slowed by 2023’s sharp inflation and supply chain imbalance.
An eye on the year ahead
A positive report in January is exactly what manufacturing needs to mount a comeback in 2024. With supply chains stabilizing, inflation under control, and labor strong, manufacturing has a real chance to propel growth heading into spring — and beyond. It’s possible that January’s positive report is the first of many to come this year.