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Monday, February 1, 2016

Manufacturing PMI Shows Strength

The manufacturing PMI runs hot compared to other data on the sector and, at a solidly plus 50 reading of 52.4 in January, may be overstating the momentum of the sector. New orders picked up steam in the month driven by stronger growth in domestic demand than foreign demand and despite continued contraction for energy equipment. Production also rose in the month. Job creation slipped amid caution on the outlook with inventories steady to slightly lower and input buying, in a telling sign of defensiveness, near a 2-year low. Price data show life for finished goods, up only moderately but still the best showing since August. Input costs slipped further, offsetting higher costs for wages, the latter another positive for inflation. This report shows welcome life and hints at perhaps a 50 reading for the ISM index.

Recent History Of This Indicator:
The flash January manufacturing PMI improved by a solid 1-1/2 points to a 52.7 level that is, however, on the soft side for this report which typically runs hotter than the ISM. New orders firmed on strength in domestic demand, offsetting another month of weakness for exports. Backlogs also stabilized in the flash report. Other readings included a gain for production but slowing for job creation. A 1 tenth dip back to 52.6 is expected for the final January reading.

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