Manufacturing Unexpectedly Surges in January

Economic activity in the manufacturing sector expanded by more than expected in January.

The Institute for Supply Management’s manufacturing index came in at 56.6 for January, easily surpassing economist expectations for 54 score.

This measure of economic activity, which is based on a monthly survey of purchasing managers at roughly 300 manufacturing firms nationwide, had weakened considerably to 54.1 in December and was expected to continue weakening. The unexpected turnaround is another signal that the economy has strengthened recently, defying predictions that it would slow.

The New Orders Index, which had come in very weak in December, registered 58.2 percent, an increase of 6.9 percentage points. The Production Index registered 60.5 percent, 6.4-percentage point increase.

The Prices Index registered 49.6 percent, a 5.3-percentage point decrease from the December reading of 54.9 percent, indicating a drop in prices of raw materials. Critics of tariffs have long been predicting that trade disputes would put upward pressure on the prices of materials used in manufacturing. Instead, raw materials in January saw the first monthly drop in materials prices in three years.

The Employment Index weakened to 55.5 percent, a decrease of 0.5 percentage point from the December reading of 56 percent.

“The manufacturing sector continues to expand, reversing December’s weak expansion,” said Timothy R. Fiore,  Chair of the ISM Manufacturing Business Survey Committee.