U.S. manufacturing activity slowed slightly to 58.7 in January, from 60.5 last month and below analysts' expectations of 60. Still, the reading pointed to an 8th consecutive month of growth in factory activity and at a robust pace.
Further details of the publication revealed that the New Orders Index edged lower to 61.1 from 67.5, however Employment Index rose to 52.6, the best reading since June 2019, from 51.7 in the previous month and the Prices Paid Index jumped to 82.1 from 77.6, which is the highest level in nearly 10 years as supply chain problems continue to weigh heavily on manufacturers' costs, which in turn bolsters expectations that inflation will accelerate this year. For this to happen, unemployment would have to drop significantly as high unemployment limits producers' ability to raise prices. Meanwhile higher reading of Employment index indicate rebound in hiring this month after the economy shed jobs in December for the first time in eight months. This could be a sign that the manufacturing sector may be contributing positively to overall economic activity in the first quarter.
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Despite a slight decline in the main ISM index and regional surveys, the US manufacturing sector remains in good condition. Source: Macrobond, XTB.
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