February 5, 2023

The following are diffusion indices, based on business surveys, which means that >50 indicates expansion and <50 indicates contraction, and 50 indicates no change. A larger or small number indicates breadth, not intensity, among survey respondents.

ISM Manufacturing Index fell -1.0 points in January to 47.4, its third month in contraction.

While manufacturing employment seems to be in modest expansion, most other indicators are showing a sector downturn. The good news is that price pressure has turned negative.

US companies responding to the ISM Manufacturing survey report a mixed environment, with some saying sales are resilient, while others say they are down. Some report continued supply chain issues, but others say price pressures are receding.

The S&P US Manufacturing PMI rose +0.7 points in January, but remains in contraction at 46.9.

S&P’s economists made the following observations:

The ISM Services Index covers a broader range of the U.S. economy. It bounced back +6.0 points in January, out of a one-month contraction, to a solid 55.2 expansion reading.

New orders, in particular, surged +15.2 points to a solid expansion reading of 60.4. Employment was tepid at 50.0, as were supply deliveries. But nearly everything else, except for inventories, went back into expansion territory.

Companies responding to the ISM Services survey in January report a very complicated picture, which varies greatly by sector:

In contrast, S&P’s US Services PMI rose +2.1 points in January, but remained in contraction at 46.8.

S&P economists say the continued negative PMI reading for services suggests the US economy could see negative GDP growth in Q1.