U.S. Manufacturing Index Indicates Notably Slower Growth In January

(RTTNews) - While the Institute for Supply Management released a report on Monday showing modest growth in U.S. manufacturing activity in the month of January, the pace of growth slowed much more than economists had been anticipating.

The ISM said its purchasing managers index fell to 51.3 in January from a revised 56.5 in December. A reading above 50 indicates continued growth in the manufacturing sector, but economists had expected the index to show a much more modest decrease to a reading of 56.0.

With the much steeper than expected decrease, the purchasing managers index fell to its lowest level since hitting 50.0 in May of 2013.

Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "A number of comments from the panel cite adverse weather conditions as a factor negatively impacting their businesses in January."

The report showed a substantial slowdown in the pace of new orders growth, as the new orders index tumbled to 51.2 in January from 64.4 in December.

The production index also dropped to 54.8 in January from 61.7 in December, while the backlog of orders index fell to 48.0 from 51.5.

The ISM also said the employment index slid to 52.3 in January from 55.8 in December, indicating a slowdown in the pace of job growth in the manufacturing sector.

Rob Carnell, chief international economist at ING, said, "With payrolls on Friday, this data suggests that the labor market figures for this month could well be disrupted again following earlier weather-related distortions to the December figure."

"Markets will most probably take the coming labor report with another grain of salt and keep focusing on the ADP and unemployment rate," he added. "We expect the U.S. data to come bouncing back once normal weather resumes."

On the inflation front, the report showed that the prices index jumped to 60.5 in January from 53.5 in December, suggesting a notable acceleration in the pace of price growth.

The ISM is scheduled to release a separate report on service sector activity on Wednesday. The index of activity in the service sector is expected to inch up to 53.9 in January from 53.0 in December.