The Institute for Supply Management’s (ISM) Manufacturing PMI continued to grow rather strongly, accelerating to its fastest pace since November 2014. The composite index rose from 54.5 in December to 56.0 in January, and it marked the fifth straight monthly expansion in the headline number. New orders (up from 60.3 to 60.4) and production (up from 59.4 to 61.4) expanded strongly in January. Along those lines, the sample comments all point to healthier conditions and stronger demand in the manufacturing sector, which is very encouraging. In addition, employment also picked up the pace (up from 52.8 to 56.1), suggesting that manufacturers have begun to move past the more cautious approach to hiring seen just a few months ago.
On the other hand, exports (down from 56.0 to 54.5) slowed a little, even as international sales growth remained somewhat modest. In contrast, imports (down from 50.5 to 50.0) were stagnant for the month.
Meanwhile, inventories (up from 47.0 to 48.5) contracted for the 19th consecutive month. With reduced stockpiles available, manufacturers will need to increase production to meet additional demand. In addition, input prices (up from 65.5 to 69.0) rose significantly in January, with the index exceeding 60 for the second consecutive month. This mirrors other data indicating accelerating pricing pressures in the economy.