Index signals slow but steady growth

Don Hogsett, February 9, 2004

TEMPE, ARIZ. — The nation's manufacturing sector gained strength, if only slightly, for an eighth straight month in January.

The steady climb points to a continued rebound in one of the drivers of the nation's economy, according to a monthly barometer compiled by the nation's purchasing managers.

The monthly Purchasing Managers' Index, prepared by the Institute for Supply Management (ISM), edged up by 0.2 percentage points during the month to a current level of 63.6, the highest reading in more than a year.

The rate of growth was slower than during recent months, and the signals sent out by those who hold the purse strings for the nation's big manufacturers were mixed. While production was up at a 1.9 percent clip, the rate of growth slowed for new orders, employment, order backlogs and export orders.

In the most jarring note in the monthly canvass, the prices manufacturers paid for supplies and raw materials rocketed up 9.5 percentage points to a current reading of 75.5 from the prior-month level of 66.0.

"The last time the Prices Index registered higher was in March 2000, when it registered 78.7 percent," said the purchasing managers' trade group. "In January, 54 percent of supply executives reported paying higher prices and 3 percent reported paying lower prices. Textiles and furniture were among the 17 industries reporting higher prices.

"The manufacturing sector gained momentum in January as the Purchasing Managers' Index continued to accelerate," said Norbert J. Ore, chairman of the ISM's Manufacturing Business Survey Committee.

He said comments from purchasing managers are generally encouraging, with some mentioning "record sales and orders on a per-day basis," and others saying customers "are beginning to refill their inventory pipelines."

Painting a mixed picture, some say they still see no signs of a recovery, Ore commented, like one who wrote: "Recovery? What recovery?"

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

Source: Institute for Supply Management
Purchasing Managers Index +0.2%
New Orders -2.0
Production +1.9
Employment -0.6
Inventories +2.6
Customers' Inventories +1.0
Prices Manufacturers Pay +9.5
Order Backlogs -0.5
Export Orders -2.5
Imports +1.4

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