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Manuf. positive in Jan., but growth slows

U.S. manufacturing activity, while still holding at modest levels, expanded for a third straight month in January, holding out hope that the underpinnings of an economic recovery may finally be in place.

The nation's purchasing managers, who control the purse-strings of American industry, said their monthly gauge of overall activity produced a reading of 53.9 in January, down 1.3 percentage points from the prior month, but still modestly above the crucial level of 50.0. A reading above 50.0 indicates growth in the manufacturing sector, while anything beneath points to a slowdown.

"The manufacturing sector continued its growth trend in January, though the rate of growth slowed when compared to December," said Norbert Ore, chairman of the Institute for Supply Management's Business Survey Committee. "It is encouraging that new orders continued strong in January. Production also fared well, providing cause for optimism."

While the rate of growth in the New Orders Index slowed somewhat last month, slipping by 3.2 percentage points, the index remained in positive territory, with a reading of 59.7. The Production Index held relatively steady at 56.3, down a slender 0.3 percentage points. Order backlogs continued their long slide and declined for a seventh straight month in January, slipping by 1.5 percent to a level of 45, solidly beneath the break-even level.

Providing hope for a strengthening in both new orders and production going forward, purchasing managers said their customers' inventories remained at a low level of 42.5, nosing down by 0.5 percentage points in January.

The Manufacturing Employment Index continued its long decline in January, falling by 0.6 percentage points to a level of 47.6. The employment index has now remained the 50.0 benchmark for 28 consecutive months.

While executives remain somewhat optimistic, the trade group said, the threat of war with Iraq is still having a dampening effect. "Adding to the list of concerns, energy prices are a major factor as oil and natural gas prices are skyrocketing."

January snapshot
Manufacturing benchmarks
Month-over-month percentage-point change

Source: Institute for Supply Management
Purchasing managers Index -1.3
New orders -3.2
Production -0.3
Employment -0.6
Inventories -0.8
Customers' inventories -0.5
Order backlogs -1.5
Export orders +3.3
Imports +4.2


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