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Report On Business® Roundup: January Manufacturing PMI®

February 03, 2025
By Dan Zeiger

When the Manufacturing ISM® Report On Business® data for January was released at 10 a.m. ET on Monday, news that U.S. factory activity expanded for the first time in 27 months was drowned by a cacophony of anxiety regarding announced tariffs on products from Canada, Mexico and China, the nation’s three biggest trading partners.

“The biggest issue for panelists was the (potential) effects of tariffs on their companies’ supply chains and cost structures, and you’re seeing a lot of that in full this morning,” Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee, told a conference call of reporters in the moments after the PMI® number was revealed and as markets had dipped in early trading on the tariff threat.

The ensuing hours served as a lesson on how quickly circumstances can change with a president that is often unpredictable. By the time of ISM’s LinkedIn Live broadcast on the Report On Business® commenced at noon ET, the duties on Mexican products had been paused for 30 days. Those on Canadian products had been paused by the end of the day.

Fiore was glad to take focus from the “shiny object” of tariffs to discuss what could be a pivotal month for the Manufacturing PMI®.

The composite index reading of 50.9 percent was the first in expansion since October 2022, powered by growth in four (New Orders, Production, Employment and Supplier Deliveries) of the five subindexes that directly factor into the PMI®. The impact from seasonal adjustment factors was minimal, Fiore said, and the fundamentals suggest that this could be the start of an expansion cycle and not a one-off reading.

(A PMI® of 50.3 percent in March 2024 was revised to 49.8 percent after seasonal adjustment factors for the Manufacturing and Services ISM® Report On Business® indexes were completed in January. Such factors, ISM describes, “allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-movable holidays.”)

“The seasonal factors for January this year were half of what they were in January of last year, and the performance was better,” Fiore said. “I think that’s the summary. For new orders and production, the seasonals were weaker and the raw numbers on performance stronger. So, these were very good numbers that feel right.”

The New Orders Index reading of 55.1 percent, in expansion territory for the third month in a row, is the highest since since May 2022 (56 percent). The Production Index (52.5 percent) expanded for the first time in nine months, and the Employment Index (50.3 percent) ended a streak of seven months of contraction, suggesting that companies’ lengthy efforts to reduce head counts and right-size staffs could be over.

There were two areas of concern. Even amid extra buying to get ahead of potential tariffs, the Inventories Index decreased 2.5 percentage points to 45.9 percent as companies struggled with supply and demand balance, Fiore said. The Prices Index (54.9 percent) reading indicates that limiting further growth as demand increases will be a challenge.

“We had price pressure in January with relatively weak demand, not super strong,” Fiore said on the LinkedIn Live broadcast, noting that the weak expansion of the Supplier Deliveries Index (50.9 percent) in January does not correlate with heavy buying levels.

He added, “If you have strong price growth without strong demand, there’s only one direction that can go over time. As demand increases, the prices are going to increase. So, what do we do about that? You can’t cut (interest) rates if prices are growing.”

While the tariffs on Mexican and Canadian products were temporarily resolved on Monday, duties on those China remain scheduled to take effect this week, and President Donald Trump is promising action regarding products from the European Union and United Kingdom. Although markets reversed their early losses on Monday and protectionist trade policies have become a fact of life for companies, Fiore has said often during his eight-year tenure as Business Survey Committee Chair that manufacturers don’t have much without demand.

Protracted tariffs turbulence could lead to a “false start on demand,” he said.

“Supply managers are free marketeers; we don’t like things jumping in the middle of our trade agreements,” Fiore added. “While people were ready for the Chinese tariffs, I don’t think they were ready for the North American ones. If the intention is border policy (with Mexico and Canada), then the tariffs will be short-lived. If the intention is to bring product back to the U.S., that's going to take more time. So, there are still a lot of unknowns.”

The January report was Fiore’s last as the face of the Manufacturing PMI®; he has served since May 2017. He will be succeeded by Jeffrey P. Wincel, MBA, D.Min., who recently retired as senior vice president and CPO at NXP Semiconductors. Wincel has held leadership roles at AMD, ON Semiconductor and Honeywell Aerospace, among other companies.

“It’s been a great run,” Fiore said on LinkedIn Live. “This PMI® is a great tool and a great document. … It’s been a pleasure to try to provide the best analysis we can and provide clarity on what’s happening. Sometimes, we were more accurate than others, but trying to predict the future is not easy, especially when it’s multidimensional.”

The Report On Business® roundup:

Barron’s: Manufacturing Sector Expands in January, Snapping Streak of Contraction. “That’s more good news, but none of that matters on Monday. The Industrial Select Sector SPDR ETF was down almost 2 percent in early trading. Tariffs are the reasons. It was a relatively solid PMI report, but it tells investors what happened in January. They are worried about the rest of the year.”

Bloomberg: U.S. Manufacturing Activity Expands for First Time Since 2022. “While the survey suggests optimism is gradually building among factory managers, the threats of tariffs, plodding overseas economies and a stronger US dollar risk tempering enthusiasm about a more favorable regulatory environment and pro-business fiscal policy.”

Mace News: ISM Manufacturing Back in Growth at Start of 2025, Waking Up from More Than 2 Years of Doldrums. “Asked if the U.S. manufacturing sector has seen a revival of demand without the help of further interest rate cuts by the Federal Reserve, Fiore replied that the sector is having a cyclical rebound after the long doldrums, adding that the Trump tariffs will probably support more rate cuts from the Fed, which has been cautious amid resilient economic growth and sticky services inflation.”

MarketWatch: ‘This Is Not a Good Thing for Business’: ISM Calls Trump Tariffs a Threat To Manufacturing Recovery. “Now the big question is whether the fresh momentum will fade if a trade war breaks out. Manufacturers may have to contend with higher prices for raw materials they procure from other countries, and their own exports may also suffer if other countries retaliate.”

Reuters: U.S. Manufacturing Rebounds, Tariffs Could Derail Tentative Recovery. “Economists said even if tariffs were delayed, the hanging threat would still be a constraint for manufacturing through a strong dollar that makes U.S.-made goods uncompetitive on the global market. ‘Tariffs represent a negative supply shock, which hurts production and raises prices, a much smaller scale of what we experienced in the pandemic,’ said Kathy Bostjancic, chief economist at Nationwide.’ ”

ISM’s Services PMI® will be unveiled on Wednesday, and the Hospital PMI® on Friday. For the most up-to-date content on the reports under the ISM® Report On Business® umbrella, use #ISMPMI on X, formerly known as Twitter.

(Photo credit: Getty Images/Andrei Metelev)

About the Author

Dan Zeiger

About the Author

Dan Zeiger is Senior Copy Editor/Writer for Inside Supply Management® magazine, covering topics, trends and issues relating to supply chain management.