IHS Markit US Manufacturing PMI

Overall operating conditions across the U.S. manufacturing sector improved in January, supported by faster expansions in output and new orders. Domestic demand drove new business growth, as new export orders rose only marginally and at the weakest rate since last October. Business confidence about the year ahead also picked up markedly to reach a three-month high. Meanwhile, goods producers increased their workforce numbers strongly amid a quicker rise in new orders. Nonetheless, backlogs continued to expand. On the price front, input cost inflation eased to a 12-month low but remained marked and above the series trend.

The seasonally adjusted IHS Markit final U.S. Manufacturing Purchasing Managers’ Index (PMI) posted 54.9 in January, up from 53.8 in December. The latest headline figure signalled a strong and faster improvement in the overall health of the sector, and was above the long-run series average.

Supporting the higher PMI reading was a sharp and quicker expansion in production across the manufacturing sector in January. The rise in output was the fastest since last September and stronger than the series trend. Panellists stated that output growth stemmed from greater client demand and efforts to clear backlogs.

Similarly, the upturn in new orders accelerated and was steep overall. The latest rise in new business extended the trend seen throughout the series history. Anecdotal evidence suggested that new client acquisitions and more favourable domestic demand conditions drove the increase. Furthermore, the rate of new export order growth softened in January. The pace of expansion was the slowest since last October and only marginal overall.

In line with greater production requirements, manufacturing firms expanded their workforce numbers at a solid rate, with growth picking up from December's recent low. At the same time, surveyed companies also registered a modest rise in backlogs of work.

Meanwhile, upward price pressures across the manufacturing sector remained marked in January. Panellists continued to note that increased input costs were due to tariffs on steel and aluminium, alongside greater demand for inputs. That said, the rate of cost inflation was the slowest for one year, aided by the feeding through of lower oil prices. Manufacturing firms were able to take advantage of increased client demand and raised their factory gate charges at a faster rate.