Manufacturing shrinks again

Purchasing managers' report shows that January activity failed to grow for the 12th consecutive month.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Catherine Clifford, CNNMoney.com staff writer

How will the economic stimulus package help your job situation?
  • It won't make any difference
  • It will help me find a job
  • It will help me keep my job

NEW YORK (CNNMoney.com) -- The nation's manufacturing activity contracted in January for its 12th straight month, but the rate of decline slowed, according to a Monday report.

The Institute for Supply Management, a purchasing management group based in Tempe, Ariz., said its manufacturing index was 35.6 in January.

"It's encouraging to see this rebound on the month, but you don't want to jump to conclusions," said Robert Brusca, chief economist at Fact and Opinion Economics.

Any reading below 50 indicates a slowdown, and one below 41 is typically associated with a recession in the broader economy.

Economists were expecting 32.5, nearly unchanged with the previous month, according to a consensus estimate of economists polled by Briefing.com. The revised December reading was 32.9.

In order to see an improvement in the manufacturing sector, purchasing managers said they would need to see two of the nation's hardest hit industries show a turnaround.

"Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper," Norbert Ore, chair of the Institute for Supply Management Manufacturing Business Survey Committee, said in a statement.

Manufacturing is a key component in assessing the health of the economy as a whole. On Friday, the government reported that gross domestic product fell in the fourth quarter by 3.8%, the sharpest decline in 26 years.

But with consumers and businesses pulling back the reigns on spending in the recession, the manufacturing sector has suffered. "You need credit, you need confidence and you need employment," said Brusca. "The holy trinity of consumption is under attack."

The ISM report is a national survey of purchasing managers in the manufacturing sector. The monthly survey tracks new orders, production, employment, supplier deliveries, inventories, customers' inventories, prices, backlog of orders, new export orders, imports and buying policy.

The report's Prices Index showed a reading of 29 in January, compared with 18 in the previous month. The increase indicates producers are paying less to produce goods.

"On a positive note, the Prices Index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer," said Ore.

The employment part of the monthly manufacturing index held steady at 29.9, offering a possible preview of the government jobs report due out on Friday.

"This extremely low reading suggests massive losses in manufacturing payrolls in data to be released on Friday," Adam York, economist at Wachovia, wrote in a report.

The government is expected to report that the unemployment rate increased to 7.5% as employers slashed 500,000 employees from their payrolls, according to a consensus estimate compiled by Briefing.com. York said that the ISM reading on employment "would suggest a 500,000-plus job loss is probable in Friday's release." To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
6 luxury getaways to escape your digital life Step away from your smartphone. No Facebook or Twitter here. These are six places where luxury travel agents send clients looking to unplug and experience the ultimate digital-detox getaway. More
Most reliable cars - Consumer Reports These cars, trucks and SUVs scored best in the magazine's latest survey of vehicle owners. More
Some Converse copycats cost big bucks A few bargain brands got swept up in Chuck Taylor's net, but others cost a pretty penny. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.