U.S. Jan ISM falls to lowest level since Sept. 2003 -
Tuesday, February 1, 2005 4:20:44 PM
WASHINGTON (AFX) -- Factory activity in the United States decelerated in January, the Institute for Supply Management reported Tuesday. The ISM index fell to 56.4 percent in January from a revised 57.3 percent in December. This is the lowest level of manufacturing activity since Sept. 2003. The decline was expected larger than expected. Economists were expecting the index to fall to 57.2 percent in January, according to a survey conducted by MarketWatch
Norbert Ore, chair of the ISM manufacturing business survey committee, said the decline in the headline overstated the weakness in the sector
"The manufacturing sector is alive and well and so I would be a little reluctant to attach too much meaning to that" headline figure, he said
The ISM manufacturing index averaged over 60 for the year, for the first time since 1974
"So we are coming off a very strong year. You just can't maintain that type" of pace, he added
This is the 20th month the index has been above 50. Readings over 50 percent indicate growth in the sector. The ISM measures the breadth of economic activity across the manufacturing sector, rather than the depth or intensity of growth
The drop in the January ISM was led by the new orders index, which fell to 56.5 in January from 62.6 in December. Economists said that businesses had rushed in December to complete orders for capital equipment to take advantage of favorable tax rules that were expiring at the end of the year
In a sign of underlying strength, the employment index rose to 58.1 in January from 53.3 in the previous month. This is the highest employment level since last June
"I think we are going to see strength in employment in manufacturing this year," Ore of the ISM survey committee said
The production index rose to 57.8 percent from 56.9 in December
Inventories remained unchanged at 52.8 in January
The orders backlog fell to 50.5 percent from 54.0 in December
The price index fell to 69.0 in January from 72.0 in the previous month. This is the lowest level since December 2003
"We are starting to see some industries reporting some price relief," Ore said
Matt Johnson, economist at ThinkEquity, said that "all in, month's ISM report should be viewed favorably, particularly as it falls short of indicating a sharp strengthening which will keep at bay concerns over a shift in the Fed's aggressiveness."
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