Factory production continued to expand at the start of 2014, according to a recent report, but not at the accelerated pace it was going at the close of 2013.

The Institute for Supply Management’s factory index, known as the PMI, registered at 51.3 in January. The Tempe, Ariz.-based group’s report says that reading more than 50 indicate growth.
Likewise, of the 18 manufacturing industries, 11 reported growth in January, the monthly analysis says.

But that’s where the good news ends, officials say.

That’s because the PMI was a 5.2-percent drop from the thumbs-up 56.5 reported in December. And the report’s New Orders Index registered 51.2 percent, a significant decrease of 13.2 percentage points from December’s seasonally-adjusted reading of 64.4 percent.

It is the slowest pace of expansion in eight months, according to Bloomberg.

The Production Index, meanwhile, registered 54.8 percent, a decrease of 6.9 percentage points compared to December’s seasonally adjusted reading of 61.7 percent. Inventories of raw materials also dropped, by 3 percentage points, to 44 percent, its lowest reading since December 2012.

Adverse weather conditions were a primary reason behind the drop in all of the above sectors, the report claims, citing comments from its surveyed panel.

“Poor weather impacted outbound and inbound shipments,” a respondent in the fabricated metal sector said, according to the report.

“Good finish to 2013, but slow start to 2014, mostly attributed to weather,” added another respondent, in the petroleum & coal products sector.

Plastic and rubber products were also adversely affected by the brutal climate, the report says. “We have experienced many late deliveries during the past week,” a respondent said, “due to the weather shutting down truck lines.”

Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, also blamed the weather.

“The exceptionally cold weather and the harsh snow storms – we all move a little bit slower in those periods and the economy is no different,” Price said, according to Bloomberg, which said Price is the top-ranked forecaster of the ISM index over the past two years.

“It should be some testament to the economy’s fundamental underpinnings that it was able to expand during such conditions,” Price added, according to the Bloomberg report.

But Cliff Waldman, senior economist and council director to the MAPI Manufacturing Council, voiced greater concern over the ISM’s latest readings.

“The recent acceleration in U.S. economic growth along with the slow recovery in the global economy suggests that the most likely path for U.S. manufacturing during 2014 is one of moderate growth,” he says in a statement.

Nonetheless, he adds, the January ISM report is a reminder that risks remain in a post-crisis environment.

“The recovery in the Eurozone is fragile and potentially flirting with deflationary pressures,” he says. “China’s slowdown is wider and deeper than many expected. And the turmoil in emerging markets needs to be watched for its potential global impacts.”

About the Manufacturing ISM Report on Business
The Manufacturing ISM Report On Business is published monthly by Institute for Supply Management, the first supply institute in the world. Founded in 1915, ISM’s mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM Report On Business — ISM maintains a strong global influence among individuals and organizations. ISM is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries. This report has been issued by the association since 1931, except for a four-year interruption during World War II.


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