January ISM Manufacturing Rebounds into Positive Territory

Manufacturing ISM unexpectedly rebounded in January to 50.7 from a revised higher 48.4 in December. Consensus had been looking for a decline to 47.3 from the originally reported 47.7 level. Any figure above 50 indicates expansion, while falling below the level indicates contraction. January's stronger performance pulls the indicator back into moderate growth territory. Over the past six months, the average has been 50.2. (FYI - The ISM manufacturing index used a new weighting for the headline figure this month giving equal weight to five of the major components.) The strength in January is due to a rebound in the production index which rose 6.6 points to 55.2. New orders rose 2.6 points to 49.5, but remain below breakeven. New export orders were especially strong at 58.5 vs 52.5 the prior month. Inflation remains an issue, as prices paid jumped to the highest level in over six months at 76, versus 68 in December. Also, the rise in inventories (49.1 vs. 45.4) is a concern. The inventory index gained more weight in the January index. The employment index eased back to 47.1 from 48.7. this is the lowest employment reading since 2003, and provides further support for this morning's decline in national employment in January. Historically, January's 50.7 reading equates to about a 3% real GDP growth rate.