The Institute for Supply Management (ISM) index of manufacturing for January printed at 59.1, largely unchanged from a downward revised 59.3 recorded in December, and ahead of market expectations of a slightly more pronounced decline to 58.8. This marks the 17th straight month that the index has been in expansionary territory.
The underlying details of the report were mixed, with the headline index benefiting largely from strong advances in inventories (+3.8 to 52.3) and supplier deliveries (+1.9 to 59.1). Employment (-3.9 to 54.2), new orders (-2.0 to 65.4), and production (-0.7 to 64.5) all fell back in January, coming off of cycle highs at the end of 2017.
Prices paid recorded a healthy gain of 4.4 points to 72.7, a new cycle high.
The spread between new orders and inventories – a good leading indicator of activity – narrowed to 13.1 (-5.8 points) in January after reaching a cycle-high of 18.9 in December. Overall this indicator remains consistent with manufacturing activity continuing to expand through the first quarter of 2018.
Key Implications
The stellar performance of the U.S. manufacturing sector continues into the New Year, with no clear end in sight. Healthy demand for U.S. manufactured goods should persist especially as savings from tax cuts arespent, and as long as healthy global demand persists. Better insight on the health of the U.S. economy at the start of 2018 will be gleaned from January car sales out later today, and tomorrow’s payrolls report.
