The manufacturing sector started the new year with renewed expansion, as the S&P Global US Manufacturing PMI™ rose to 51.2 in January from 49.4 in December. The index moved into expansion territory for the first time in seven months and the latest reading was above the forecasted reading of 50.1.
Here is an excerpt from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in the latest press release:
“A new year and a new President has brought new optimism in the US manufacturing sector. Business confidence about prospects for the year ahead has leaped to the highest for nearly three years after one of the largest monthly gains yet recorded by the survey. Over the past decade, only two months during the reopening of the economy from pandemic lockdowns have seen business sentiment improve as markedly as recorded in January.
“Manufacturers report that political uncertainty has cleared and the pro-business approach from the new administration has brightened their prospects. Production has already improved after falling throughout much of the last half of 2024, amid rising domestic sales. Factories have also stepped up their hiring to meet planned growth of production capacity.
“However, a rise in the rate of increase of both input costs and selling prices could become a concern if this intensification of inflationary pressures is sustained in the coming months, especially as the combination of higher price pressures alongside accelerating economic growth and rising employment is not typically conducive to cutting interest rates.”
Background on the S&P Global US Manufacturing PMI
The S&P Global US Manufacturing PMI™ measures the activity level of purchasing mangers in the manufacturing sector through a questionnaire of ~600 manufacturers. The reported headline number is a weighted average of New Orders (30%), Output (25%), Employment (20%), Suppliers' Delivery Time (15%), and Stocks of Purchases (10%). The S&P Manufacturing PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.