US manufacturing activity jumped in January

Economic activity in the manufacturing sector expanded in January, bolstered by strong demand and output, according to the latest reading by the nation's supply executives.

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Last month, economic activity in the U.S. manufacturing sector climbed to 56.6 percent, an increase of 2.3 percentage points from the December reading of 54.6, according to the Institute of Supply Management (ISM).

"Exports continue to expand, but at the lowest level since the fourth quarter of 2016,” Timothy Fiore, chair of ISM, said in a statement. “Prices contracted for the first time since the first quarter of 2016. The manufacturing sector continues to expand, reversing December's weak expansion, but inputs and prices indicate fundamental changes in supply chain constraints.”

Consumption and demand both strengthened, according to the report, while employment in the sector also grew.

Economists have been split about the effects of a nearly year-long trade war between the U.S and China, which has culminated in billions of dollars in tariffs, including those affecting the steel and aluminum industry, on manufacturing.

“Many believe that tariffs will have more of a negative impact than positive on engineering and manufacturing, while some believe they could contribute to the reshoring of manufacturing jobs,” the American Society of Mechanical Engineers wrote in August.

Of the 18 manufacturing industries, 14 reported growth in January.

The manufacturing report follows the release of the January payroll data by the Department of Labor, which revealed that the U.S. economy created a stunning 304,000 jobs last month, far exceeding Wall Street’s expectations.

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In fact, in January, manufacturing created 13,000 jobs alone.

"This report shows that manufacturers are keeping their promise to hire more workers and raise wages in the wake of tax and regulatory reform," Michael Shapiro, NAM chief economist, said in a statement. "Additional action on key priorities, such as approving the USMCA, will give manufacturing the confidence and certainty it needs to continue the strong growth of the past two years.”