U.S. manufacturing activity grows in January for fifth straight month, momentum likely to continue in months ahead

Manufacturing activity in the U.S. grew for the fifth straight month in January. The ISM manufacturing index rose 1.5 points to 56 in January, indicating the strongest pace of growth in over two years. Consensus expectations were for a rise to 55.

Nearly all subcomponents saw a rise in the month. Employment index saw the highest gain of 3.3 points, rising to 56.1. This was followed by prices and production that rose to 69 and 61.4 respectively. Meanwhile, subcomponents such as new export orders, imports and customers’ inventories recorded declines in the month.

The spread between inventories and new orders narrowed a tad to 11.9 in January; however, it stays elevated. This implies that momentum in the manufacturing activity growth is expected to continue in the months ahead, although at a slightly lower pace, noted TD Economics in a research report. Out of eighteen industries, twelve reported growth in the month.

Survey respondents’ comments were mainly positive, but with some signs that global events have had a significant effect on demand. However, import restrictions on hot rolled steel are starting to result in supply shortages, according to a survey respondent. Supply disruptions and possible shortages might become a cause of concern for U.S. manufacturers if the new U.S. administration follows through with the threats to impose protectionist trade measures, stated TD Economics.

Price growth accelerated at its fastest pace since the spring of 2011. Price growth was mainly driven by increased commodity prices, a factor that would add robustly to the rise in headline producer and consumer prices through 2017.