US manufacturing production reaches highest level since October 2022

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He refuses The US manufacturing sector appears to have hit bottom, a positive sign for the economy.

Thursday, ISM Manufacturing PMI for January It recorded a reading of 49.1 percent, up from 47.1 percent in the previous month and above Wall Street estimates for a reading of 47.2. While this is below the reading of 50 needed to indicate expansion in the sector, the reading was the strongest since October 2022.

In addition, the ISM New Orders Index rose to 52.5 from 47.1 in the previous month. Economists had expected the index to reach 48.2 in January.

“The strong rebound in the ISM manufacturing index…suggests that the decline in the sector is fading and appears to vindicate the Fed’s view that it can wait a little longer before cutting interest rates,” wrote Andrew Hunter, deputy chief US economist at Capital Economics. In a note to clients on Thursday.

The positive reading on activity comes a day after Federal Reserve Chairman Jerome Powell He said that the US economy is expanding at a “strong pace.” Powell noted during the press conference that this gives the central bank more time to keep interest rates high while it waits for further confirmation of inflation’s downward path.

“We feel that inflation is coming down,” Powell said. “Growth has been strong. The job market is strong.”

Powell highlighted the latest reading of fourth-quarter GDP, which showed the economy Growth at an annual rate of 3.3% In the last three months of 2023. And compared to the fourth quarter of 2022, Real GDP grew by 3.1% In the fourth quarter.

Other economic data was also strong. Data released by the S&P Flash Purchasing Managers’ Index last month showed economic output Recording its highest levels in seven months In January. This comes as Consumer expenses She remained steadfast and The labor market remained the same.

When asked whether strong economic growth was still a major risk to keeping inflation above the Fed’s target, Powell said that was no longer a major concern.

“We don’t see it as a problem,” he added. “I think at this point we want to see strong growth. We want to see a strong labor market. We’re not looking for a weaker labor market. We’re looking for continued low inflation, as has been the case in the past.” In the past six months.”

Not everyone saw Thursday’s manufacturing data as entirely positive. The ISM release “highlights the elasticity paradox,” Shannon Seery-Green and Tim Quinlan, economists at Wells Fargo, noted in a note to clients.

While manufacturing showed signs of recovery, the release also included other, less encouraging signs. The price index, a potential indicator of inflation, rose to 52.9 in January from 45.2 the previous month. Meanwhile, employment fell to a reading of 47.1, down from 48.1 the previous month.

Rising prices and shrinking salaries put the Fed “in a bind,” Wells Fargo’s team of economists wrote.

“Policymakers are dealing with an economy that is so resilient that it risks arresting inflation’s downward trend,” Wells Fargo economists wrote.

Workers assemble cars at a newly renovated Ford assembly plant in Chicago, June 24, 2019. The plant was renovated to build the Ford Explorer, Police Interceptor Utility and Lincoln Aviator. (Jim Young/AFP via Getty Images) (Jim Young via Getty Images)

Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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