Factory Gauge Falls to Lowest Since May 2020

The Ford F-150 Lightning assembly line
The Ford F-150 Lightning assembly line at the Ford Motor Co. Rouge Electric Vehicle Center in Dearborn, Mich. (Emily Elconin/Bloomberg News)

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The U.S. manufacturing downturn deepened in January, fueled by a further pullback in orders and factory production.

The Institute for Supply Management’s gauge of factory activity fell for a fifth straight month in January to 47.4, the weakest since May 2020 and less than the median estimate in a Bloomberg survey of economists. Readings below 50 indicate contraction.

The latest data — released Feb. 1 — underscores how a combination of rising interest rates, waning demand for merchandise, and economic uncertainty are weighing on factory activity.

The ISM gauges of both orders and production slipped further into contraction territory in January, also falling to their lowest levels since mid-2020.

Fifteen manufacturing industries reported contraction in January, led by wood products, textiles, paper products and furniture. Only two — miscellaneous manufacturing and transportation equipment — reported growth.

Chart of manufacturing activity

Meanwhile, the snarled supply chains that haunted factories in recent years continue to improve. That, paired with moderating demand both at home and abroad, has helped alleviate backlogs and shorten delivery times.

The reading “reflects companies slowing outputs to better match demand in the first half of 2023 and prepare for growth in the second half of the year,” Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee, said in a statement.

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