A PMI value below 50.0 indicates that the economy is contracting. According to foreign media reports, rising interest rates, declining demand for goods, and economic uncertainty are all putting pressure on factory operations. New orders are still in a shrinking area, at 42.5%, which is 2.6 percentage points lower than December's 45.1%.

Tim Fiore, Chairman of the ISM Manufacturing Research Committee, stated that the weaker than expected PMI in January reflects a more rational factory capacity planning, slowing down production to better match actual demand in the first half of this year. At the same time, manufacturers are preparing for growth in the second half of this year.

In addition, despite recent reports of layoffs, the employment index for January was 50.6% due to the company's need for more talent, indicating that the company will not significantly lay off employees and remains optimistic about the second half of 2023. Meanwhile, the ratio of recruitment to layoffs in January was 4:1, compared to 2:1 in the previous four months.

Fiore stated that computers and electronic products in the manufacturing industry were still in a contraction state in January, but there has been some improvement since December. Out of the 18 industries tracked by ISM, 16 industries contracted last month. But the supply chain problems that plague the electronics industry are gradually being alleviated. A computer and electronics supervisor told ISM: 'We have started to see some pricing softening and delivery times seem to be improving.'. ”

ISM reported that the Electronic Component Sales Sentiment (ECST) index from ECIA rebounded in December, reaching 65.8; The average for November is a 'disappointing' 58.1. A reading above 100.0 indicates economic growth, while December's 65.8 seems to indicate that 'component sales sentiment has bottomed out and rebounded'. This relatively encouraging news will continue into January, with the index expected to rise to 80.0, "predicted ECIA Chief Analyst Dale Ford in a statement.

With the release of financial reports by listed technology companies, "economic uncertainty" has always been a recurring theme. Phil Gallagher, CEO of well-known component distributor Avnet, stated that there are still significant differences in delivery times for many product categories. The ECIA report states that delivery times are on a downward trend, but many manufacturers are still waiting to complete the "critical components" on their material lists. Gallagher pointed out that Avnet has not seen a large number of orders being cancelled, although delivery may be delayed.

Fiore stated that despite the shortened delivery time, factory buyers are still delaying the replenishment of materials and other inventory. The ISM price index rose by 5% to 44.5 in January, and buyers may be waiting for further price reductions. The Federal Reserve raised key short-term interest rates by 25 basis points on February 1st and acknowledged that the historic surge in inflation is slowing down.

ISM also reported the following data:

The production index recorded 48%, a decrease of 6 percentage points from 48.6% in December.

The backlog index of orders is 43.4%, an increase of 2 percentage points from December.

The employment index continued to expand after rebounding from the contraction zone (seasonally adjusted 48.9%) in November.

The supplier delivery rate is 45.6%, which is 0.5 percentage points higher than the 45.1% in December last year.

The inventory index is 50.2%; A decrease of 2.1 percentage points compared to December last year.

The new export order index is 49.4%, which is 3.2 percentage points higher than the 46.2% in December.

The import index continues to be in the contraction zone, at 47.8%, which is 2.7 percentage points higher than the 45.1% in December.

Fiore concluded that due to differences in price levels and delivery times between buyers and suppliers, the new order rate remains low; These issues should be resolved in the second quarter.