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US MANUFACTURING STILL SLUGGISH

06-02-2016
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US manufacturing activity contracted again in January – its fourth straight monthly drop.

A new survey from the Institute for Supply Management revealed manufacturing activity in January increased marginally from December, but the sector is still in a slump.

The ISM purchasing managers index (PMI) for the manufacturing sector registered 48.2, slightly better than the downwardly-revised 48.0 registered in December. (Below 50 indicates contraction).

More than half of the 18 industries surveyed reported business was worse — led by the oil and gas sector, which has been cutting back sharply amid the plunge in oil prices. Also reporting shrinking business were the apparel, food and beverage, transportation equipment and fabricated metal products sectors.

Still growing were the computer and electronics, machinery, electrical equipment and printing sectors.

On the positive side, the production index increased from 49.9 to 50.2, while new orders rose from 48.8 to 51.5.

“The findings of this month’s ISM report are consistent with recent Census Bureau data on factory orders and the Federal Reserve Board’s latest index of manufacturing activity,” said Don Norman, director of economic studies for the MAPI Foundation.

“The drivers behind the slowdown in manufacturing activity are easy to identify. The slowdown in China’s economic growth and the rise in the value of the dollar over the past year are largely responsible for the decline in exports. The dramatic fall in the price of oil, coupled with the low price of natural gas, has reduced oil and gas development activity and thus the demand for manufactured goods required for such development.

“Given how the manufacturing sector has been buffeted by these negative events, it encouraging that manufacturing sector activity hasn’t contracted more sharply than it has.”

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