US manufacturing activity shrinks but demand improving

WASHINGTON: US factory activity remained in contraction last month, an industry survey said Thursday, but performed better than expected — rising to the highest level since percent, up from 47.1 in December and better than analysts expected.

But this was still below the

50-point mark separating growth from contraction, meaning the sector has shrunk for a 15th straight month. “The US manufacturing sector continued to contract, though at a marginal rate compared to December,” said ISM survey chief Timothy Fiore in a statement.

“Demand remains soft but shows signs of improvement, and production execution is stable compared to December,” he added. The new orders index shifted into expansion territory in January, while production

was growing as well. While backlogs are contracting, the employment index declined, said ISM.

Its report added that two of the six biggest manufacturing industries, transportation equipment and chemical products, logged growth last month. A survey respondent in the textile mills industry noted that after a business slowdown in December, January failed to pick up to levels seen in earlier years.

But another respondent in the machinery sector said: “We expect to see steady sales going forward, if the (US Federal Reserve) continues to hold rates and suggests a rate cut in the future.”

Rubeela Farooqi, chief US economist at High Frequency Economics, noted an “uncertain” outlook ahead but as borrowing costs shift lower over time, this could provide support to the industry. “As well, an ongoing onshoring of supply networks and investment in domestic manufacturing capacity could be positive going forward,” she added in a note.