The S&P Global US Manufacturing PMI rose to 46.8 in January of 2023 from 46.2 in December, better than expected but well below contraction pivot of 50. Factory activity continues to be hit by supply constraints and rampant inflation. S&P Global. reported private sector firms in the US registered a further decline in output at the start of 2023, according to their latest ‘flash’ PMI™ with the fall in business activity softened to the slowest in three months. The economy has been hit by stifled demand conditions and production cutbacks.
US S&P Global Manufacturing January 2023 Highlights
- Flash US PMI Composite Output Index at 46.6 (est 44.7; prev 45.0) 3-month high.
- Flash US Services Business Activity Index at 46.6 (est 45.0; prev 44.7) 3-month high.
- Flash US Manufacturing PMI Index at 46.8 (est 46.0, prev 46.2) 2-month high.
- Flash US Manufacturing Output Index at 46.7 (est 46.0, Prev 46.2) 2-month high
- Data were collected 09-23 January
A number above 50.0% is indicative of expansion.
New orders across the private sector declined for the fourth successive month in January.
The fall in new business was modest overall and eased to the slowest for three months. Inflation, interest rates and customer hesitancy continued to be reported as driving the downturn. Service providers registered a marginal decrease in new sales, but manufacturers saw new orders fall sharply once again.
Conversely, manufacturers recorded a slower contraction in new export orders compared to their service sector counterparts.
Bringing to an end a seven-month sequence of moderating input price rises
January data indicated a faster increase in cost burdens at private sector firms. Although well below the average rise seen over the prior two years, the rate of cost inflation quickened from December and was historically elevated. Hikes in vendor prices, alongside higher wage bills, reportedly spurred the sharper rise in costs. Nevertheless, the rate of output charge inflation at private sector firms was unchanged from that seen in December
January data signaled a solid uptick in selling prices, but one that was the joint-slowest since October 2020. Efforts to remain competitive and offer concessions to customers dampened output price hikes.
Rise in Employment
Despite subdued demand conditions and a further solid decrease in backlogs of work, US firms recorded a marginal rise in employment at the start of 2023. The rate of job creation was one of the softest in the current sequence of employment growth that began in July 2020
Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at S&P Global
Market Intelligence said:
“The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January. Although moderating compared to December, the rate of decline is among the steepest seen since the global financial crisis, reflecting falling activity across both manufacturing and services.
“Jobs growth has also cooled, with January seeing a far weaker increase in payroll numbers than evident throughout much of last year, reflecting a hesitancy to expand capacity in the face of uncertain trading conditions in the months ahead. Although the survey saw a moderation in the rate of order book losses and an encouraging upturn in business sentiment, the overall level of confidence remains subdued by historical standards. Companies cite concerns over the ongoing impact of high prices and rising interest rates, as well as lingering worries over supply and labor shortages.
“The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks.
Global Composite PMI for 2022
Source: S&P Global
From The TradersCommunity News Desk