In January, US manufacturing started to grow again after more than two years, thanks to strong orders. The Institute for Supply Management (ISM) announced that its Manufacturing Purchasing Managers’ Index (PMI) rose to 50.9 last month, the highest since September 2022. This is important because a figure above 50 means the manufacturing sector is improving. In December, the PMI was only 49.2.
Many economists predicted the PMI would only go up to 49.8, so this growth is surprising! However, there are worries that this recovery might not last. Recently, President Donald Trump placed new tariffs (taxes) on goods coming from Canada and Mexico, which will increase costs for raw materials. These tariffs start Tuesday, and they might complicate supply chains as well.
Manufacturing has been struggling because the Federal Reserve raised interest rates significantly last year to control inflation. Although the Fed began lowering rates last September, the impact of government policies remains uncertain. Data from the Fed shows that manufacturing declined by 0.4% during the last quarter of 2023 and the first quarter of 2024.
On a positive note, the ISM survey showed that new orders from factories jumped to 55.1 last month, up from 52.1 in December, indicating a demand for more products. Factory production also increased, with manufacturers reporting their prices paid for raw materials hit an eight-month high of 54.9, higher than many experts expected.
Moreover, imports grew, hinting that manufacturers were buying more materials before the tariffs took effect. Factory jobs also increased for the first time since May, with the jobs index rising to 50.3 from 45.4 in December.
This could be good news for the manufacturing sector, but the future is still uncertain due to rising costs and potential supply chain issues.
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