Uncategorized February 14, 2024
US Manufacturing Sector Poised for Recovery

US Manufacturing Sector Poised for Recovery

Latest PMI Report Highlights Resilience in the U.S. Manufacturing Sector

The U.S. manufacturing sector appears to be on the verge of recovery, evident in the 2 percent increase of the Purchasing Managers’ Index (PMI) in January, reaching 49.1. This figure is just a few points below the 50.0 threshold, indicating growth. Although the sector has maintained contraction for the 15th consecutive month, there’s a positive note with new orders experiencing a 5.5 percent growth, reaching 52.5 percent. Tim Fiore, the chair of the Institute for Supply Management’s manufacturing survey committee, commented, “The U.S. manufacturing sector continued to contract, though at a marginal rate compared to December. Demand improved, output remained stable, and inputs are accommodative.” Additionally, production rose to 50.4 percent, a 0.5 percent increase from December.

With a rise in new orders and stable production levels, factories are primed for growth, as noted by Fiore. Manufacturers have responded by lowering employment levels, a trend that continued into January. The ISM’s employment index stood at 47.1 percent, marking a 0.4 percentage point decrease from December’s level of 47.5.

PMI recovery US Manufacturing

Challenges and Prospects in the Semiconductor and Electronics Landscape

Several sectors within the US manufacturing industry have noted a significant improvement in the previously severe semiconductor shortage, with supply now meeting demand.  However, this development doesn’t necessarily bode well for the electronics supply chain. Many types of semiconductors and other components are currently in surplus supply, contrary to expectations. The demand for consumer electronics remains subdued, and the normalization of component supplies is not anticipated until the second half of 2024.

Prices paid by manufacturers increased in January by 7.7 percent to 52.9 as new orders rebounded. Buyers that have been waiting for further price decreases are now booking materials, said Fiore. Supplier price adjustments typically occur in January, he added, so buyers now have a pretty good idea of the pricing environment.  The supplier deliveries index indicated faster deliveries for the 16th month in a row, and the inventories index moved upward while remaining in moderate contraction.

The ISM isn’t expecting a sudden rebound in demand, however. Fiore concluded “Usually, you have a landing and then you go – I think we’ve touched landing that but are seeing a slow grow-out. There’s nothing to indicate an acceleration in demand, but it’s a grow-out nonetheless.”

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