New Data Shows US Manufacturing Expansion in January; Fastest Growth Since 2022
The latest data indicates that US manufacturing activity witnessed its first expansion in a year in January, marking the fastest growth since 2022.
According to a report released by the Institute for Supply Management (ISM) on Monday, the Purchasing Managers’ Index (PMI) for January rose to 52.6, surpassing December’s 47.9. This is the first time in the past 12 months that the index has exceeded 50, reaching its highest level since August 2022, indicating growth in the manufacturing sector, which accounts for 10.1% of the US economy.
PMI is a critical threshold at 50: a reading above 50 indicates expansion, while below 50 signifies contraction in manufacturing.
In a statement, ISM expressed, “Manufacturing economic activities expanded in January for the first time in 12 months, following 26 consecutive months of contraction.”
The expansion in manufacturing activity in January was primarily driven by robust growth in new orders and production.
According to the forward-looking New Orders Index, it surged from 47.4 in December to 57.1 in January, reaching its highest level since February 2022 (which was 59.7 at the time).
Backlog of orders saw an increase, and exports slightly rebounded. The Backlog of Orders Index rose from 45.8 in December to 51.6 in January, marking the highest level since reaching 53 in August 2022.
The Production Index climbed from 50.7 in December to 55.9 in January, reaching its highest level since hitting 58.1 in February 2022.
The Prices Index remained in expansion, rising from 58.5 in December to 59 in January.
Chair of the ISM Manufacturing Business Survey Committee, Susan Spence, stated, “In January, US manufacturing activities returned to the expansion zone, with all five sub-indexes of PMI (new orders, production, employment, supplier deliveries, and inventories) showing improvements, although the employment and inventory indexes remain in contraction.”
After nearly a year of contraction, the surge in factory activities associated with demand is good news. If this growth can be sustained, it will help confirm that the manufacturing sector is rebounding after three years of sluggish performance.
Following the release of ISM’s report, US bond yields and the dollar exchange rate rose, while the S&P 500 index continued its upward trend.