U.S. Manufacturing Index Drops More Than Expected In January

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Manufacturing activity in the U.S. saw continued growth in the month of January, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed more than expected.

The ISM said its manufacturing PMI declined to 58.7 in January from a downwardly revised 60.5 in December.

While a reading above 50 indicates continued growth in the manufacturing sector, economists had expected the index to show a more modest drop to 60.0.

The bigger than expected decrease by the headline index came as the new orders index slid to 61.1 in January from 67.5 in December and the production index fell to 60.7 from 64.7.

On the other hand, the report said the employment index inched up to 52.6 in January from 51.7 in December, indicating slightly faster job growth in the manufacturing sector.

The prices index also jumped to 82.1 in January from 77.6 in December, pointing to a faster price of price growth during the month.

“Manufacturing sector prospects for 2021 are upbeat, with solid consumer goods demand, inventory restocking, gradual business reopenings, and additional federal pandemic relief all set to keep activity on a firm footing,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

He added, “We expect manufacturing momentum to start cooling around mid-year as vaccine distribution unlocks badly-damaged services activities while concurrently quelling consumer goods demand.”

The ISM is scheduled to release a separate report on Wednesday on activity in the service sector in the month of January. The services PMI is expected to dip to 56.8 in January from 57.7 in December.


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