Red Hot New Orders Rate Driving Manufacturing Uptick

On Monday the Institute for Supply Management said that the U.S. factory-sector booked its best performance in more than five years in January. Hiring continued to recover and the rate of month-to-month growth was driven by a red-hot pace of new orders that is now accelerating higher each month.

The ISM report points to exceptional overall growth through the rest of the first quarter. The ISM’s manufacturing index jumped more than 3 points to 58.4 for its sixth straight indication of month-to-month growth. The reading easily beat consensus estimates and even beat the most optimistic of economists surveyed for such┬áconsensus.

In addition the report showed that new orders are now overflowing into backlogs — which jumped a sharp 6 points to 56.0. This is a first for this recovery. Now all three — overall manufacturing, as well as orders and backlog are all growing.

Norbert J. Ore, chair of the Institute stated, “the past relationship between the PMI and the overall economy indicates that the PMI for January (58.4 percent) corresponds to a 5.5 percent increase in real gross domestic product (GDP) on an annual basis.”

We of course are happy to point out that the current chart and outlook matches surprisingly well with our post, chart, and prediction almost a year ago. (No one believed us back then.)



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