Daily Management Review

Almost 14 Year High For US Factory Activity In January


Almost 14 Year High For US Factory Activity In January
There are indications that inflation in the United States will rise in the months ahead because of increasing prices due to bottlenecks in the supply chain caused by the Covid-19 pandemic even though the manufacturing activity in the economy increased to reach an almost 14 year high in early January.
There was also an unexpected increase in sales of previously owned homes in December, showed other data from the country. The US economy, which is still suffering because of the pandemic hit is being anchored by the manufacturing industry and the housing market. However some of the progress and growth in the manufacturing and housing sectors could be lost because of a shortage of labor at construction sites and factories due to the pandemic.
The flash U.S. manufacturing PMI from the data firm IHS Markit grew to touch a reading of 59.1 in the first half of this month which was the highest for the number since May 2007, from a value of 57.1 in December, the firm said.
Experts and economists had forecast the PMI number of drop to 56.5 in early January. A reading above 50 indicates growth in manufacturing which makes up 11.9 per cent of the US economy. Businesses that are currently rebuilding their inventories as well as an increasing shift for demand for more goods instead of services, which were in higher demand during the pandemic, which is driving the manufacturing industry growth.
Another high – since that of September 2014, was reached by the IHS Markit survey’s measure of new orders received by factories in the month of January. The growth in demand for goods indicated existence of both existing and new customers, “with some clients reportedly committing to orders previously placed on hold.” The result was more people being hired by manufacturers during the first weeks of January. The survey’s factory employment index increased to 54.8 from 52.2 in December.
But the supply chain is getting clogged because of the pandemic which is pushing up prices of materials purchased by manufacturers and the increased costs are being passed on to consumers by the manufacturers. The gauge of prices received by factories by the survey reached its highest level since July of 2008.
That survey result was similar to other manufacturing surveys which suggested a potential increase inflation and the possibility of it remaining elevated beyond the anticipated boost from the drop of weak readings in March and April from the calculation.
There was also increase in business activity because of the strength in manufacturing. Early this month, the value of the flash composite PMI Output Index of the survey, which is a tracker for the manufacturing and services sectors, increased to a reading of 58.0 during the early part of the current month compared to a value of 55.3 in December. However the speed of growth for new business decreased during the start of 2021 even while there was an increase in its flash services sector PMI to 57.5 from 54.8 in December.