U.S. manufacturing activity continues to expand in January, albeit at slightly slower pace - ISM

A report from the Institute for Supply Management (ISM) showed on Monday the U.S. manufacturing sector’s activity expanded in January 2021 albeit at a slower pace than in December 2020.

The ISM's index of manufacturing activity came in at 58.7 percent last month, down 1.8 percentage points from the revised December reading of 60.5 percent (originally 60.7). The January reading pointed to the eighth straight month of expansion in factory activity.

Economists' had forecast the indicator to decline to 60.0 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 61.1 percent, down 6.4 percentage points from the December reading, while the Production Index came in at 60.7 percent, a drop of 4.0 percentage points compared to the December reading. Meanwhile, the Prices Index posted 82.1 percent, up 4.5 percentage points compared to the December reading, the Employment Index was at 52.6 percent, 0.9 percentage point higher from the seasonally adjusted December reading, the Backlog of Orders Index registered 59.7 percent, 0.6 percentage point above the December reading and the Supplier Deliveries Index recorded 68.2 percent, up 0.5 percentage point from the December figure.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that the manufacturing economy continued its recovery in January. “Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential,” he added. “However, panel sentiment remains optimistic (three positive comments for every cautious comment), similar to December levels”. He also said that the past relationship between the PMI and the overall economy indicated that the PMI for January (58.7 percent) corresponded to a 4.4-percent expansion in real gross domestic product (GDP) on an annualized basis.