The decline in the measure reflected producers drawing down their raw materials inventories at the fastest rate since October 2024. That indicates many firms are relying on existing stockpiles to satisfy tepid demand.
Plus, materials costs remain elevated. The ISM prices-paid index, which held at 58.5 last month, is six points higher than it was at the end of 2024.
New orders contracted for a fourth month and export bookings remained weak, based on the ISM data. Headcount shrank for an eleventh straight month, albeit at a slower pace, amid modest production growth.
One bright spot in the report was customer inventories shrank at the fastest pace since October 2022, suggesting factory orders and production could firm in coming months.
See also: US core CPI rises as expected in January on services costs
Still, tariffs and the overall economic uncertainty that President Donald Trump's shifting trade policy caused during his first year in office have proved challenging for many companies as they weighed expansion plans.
But looking ahead, abating tariff uncertainty and the passage of the One Big Beautiful Bill Act are anticipated to offer a tailwind to capital expenditures this year.
The ISM's gauge of imports shrank to a seven-month low, while supplier delivery times slowed and order backlogs continued to shrink.
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