The Institute for Supply Management’s manufacturing index for January rose to 56.0, up 1.3 points m/m, beating analyst expectations and its best showing for all of 2016. New orders jumped from 60.2 to 60.4 in January the fourth increase in the last five months. The inventory index fell 1.5 points, from 56 to 54.5. (Figure 1) summarizes the January ISM report, to include all of the specifics on the sub-indexes. Momentum (3MMA -12MMA) was positive in every single category.
On a positive note, the momentum for all manufacturing sectors continue to be positive coming into January. With inventory levels down and new orders increasing we may be able to suspect that production levels will continue to increase, which is also supported by the utilization rate increase to 73.3% (as of February 11th). Manufacturing conditions should continue to improve, as the inventory levels are more favorable, energy prices are trending higher, and domestic demand is holding up well.
With a new presidential climate we should also expect to see changes in certain trends within the ISM Index. The President’s willingness to promote domestic production may yield to an increase in production trends, as well as a decrease in imports. We can already begin to see a year over year decrease in imports of 2.3% based on the January index.