U.S. manufacturing PMI index rises in January, indicates strong rebound in business conditions

Manufacturing sector’s operating conditions in the U.S. continued to rebound in January, with the latest survey data showing the strongest rise since March 2015. The seasonally adjusted IHS Markit final U.S. manufacturing PMI index rose from 55.1 in December to 55.5 in January. The index showed a robust rebound in business conditions throughout the manufacturing sector. Furthermore, the inde hinted at the strongest upturn in the sector’s health for over two-and-a-half years.

Manufacturers indicated a further increase in production in January. The pace of growth accelerated to the sharpest in twelve months. Where rises in output were witnessed, panelists attributed this to more favorable economic conditions and higher inflows of new work. Greater domestic and foreign client demand supported the biggest increase in total new orders since January 2017. New business from abroad registered one of the biggest gains seen over the past year and a half.

For the 13th consecutive month, vendor performance deteriorated as capacity pressures at suppliers led to longer lead times. Purchasing activity rose at the most rapid pace since September 2014, stretching supply chains, and pre-production inventories accumulated at the most rapid rate in 12 months. The latest rise in input costs greatly stemmed from greater raw material prices and higher transport costs. Even if the pace of inflation was marked, it dipped slightly to a three-month low.

Higher new orders added to a further increase in backlogs of work in January. The level of outstanding business at manufacturing companies rose at the most rapid rate since October 2015. Staffing figures also grew strongly, with a number of panel members linking payroll growth to greater business activity and improved future output expectations. Business sentiment among goods producers remained strong in January, in spite dipping to a three-month low.

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