The Institute for Supply Management (ISM) has reported a positive shift in U.S. manufacturing activity for January, marking the end of a 26-month contraction period. According to the ISM, the manufacturing Purchasing Managers' Index (PMI) increased from 49.2 in December to 50.9 in January. A reading above 50 signifies expansion, a result that exceeded economists' forecasts of a slight rise to 49.8.
Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, highlighted, "The PMI has climbed for three consecutive months, ultimately returning the manufacturing sector to a state of expansion."
The unexpected uptick in the PMI can be attributed in part to accelerated growth in new orders, with the new orders index elevating from 52.1 in December to 55.1 in January. The report further indicated a recovery in production, with the production index moving up to 52.5 in January from 49.9 in December, signifying growth after eight months of decline.
Employment figures also improved, with the employment index ascending to 50.3 in January from 45.4 in December, indicating expansion again after 14 out of the past 16 months of contraction.
In terms of inflation, the prices index rose to 54.9 in January from December's 52.5, marking the fourth consecutive month of rising prices. Fiore commented, "The moderate growth in prices implies that sustained growth will exert further pressure on prices. As foreseen, controlling the pace of price increases as demand rebounds will pose a significant challenge in 2025."
Additionally, the ISM plans to publish a separate report on service sector activity for January on Wednesday. Projections suggest the service sector PMI could rise slightly to 54.2, following an increase to 54.1 in December.
