WASHINGTON, Feb. 3 (Xinhua) -- Economic activity in the U.S. manufacturing sector rebounded in January after a five-month contraction, the Institute for Supply Management (ISM) reported Monday.
The Purchasing Managers' Index (PMI) stood at 50.9 percent, an increase of 3.1 percentage points from the seasonally adjusted December reading, and the highest since July last year.
The PMI dropped to a revised 48.8 percent in August 2019, indicating the first contraction in a decade. In September, the index fell further to 48.2. In December, the index hit 47.8, the lowest since June 2009. Any reading below 50 percent indicates the manufacturing sector is generally contracting.
"Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months," Timothy Fiore, chair of the ISM's manufacturing business survey committee, said in a statement. "Overall, sentiment this month is moderately positive regarding near-term growth."
Of the 18 manufacturing industries, eight reported growth in January, while eight reported contraction. "Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, followed closely by Computer & Electronic Products. Petroleum & Coal Products is the weakest," said Fiore.
Bloomberg economist Eliza Winger said the January reading likely reflects the positive impact of the phase-one trade deal between the United States and China.
"However, we are expecting the uptick to be temporary as the Boeing production halt and recent uncertainties in response to the coronavirus outbreak may stress global supply chains," Winger said.
During the 12 months of last year, the PMI averaged 51.2, the lowest in a decade, and down by 7.6 percentage points from 2018.
The U.S. economy in the fourth quarter of 2019 expanded at an annual rate of 2.1 percent, ending the year with an annual growth of 2.3 percent, according to recent data from the U.S. Commerce Department.
The gross domestic product (GDP) growth slowed in 2019, compared to 2.9 percent in 2018, primarily reflecting decelerations in nonresidential fixed investment and personal consumption expenditures (PCE) and a downturn in exports, the report said.
"Rate cuts by the Federal Reserve helped to blunt the effects of weaker growth abroad and trade wars in 2019," wrote Diane Swonk, chief economist at Grant Thornton, a major accounting firm, noting that the central bank's rate cuts partially offset losses in manufacturing with a "turnaround" in the housing sector.
The U.S. Federal Reserve lowered rates three times in 2019, amid growing uncertainty stemming from trade tensions, weakness in global growth and muted inflation pressures. These policy adjustments put the current federal funds rate target range at 1.5 percent to 1.75 percent.
The Federal Open Market Committee, the Fed's policy-setting body, left interest rates unchanged last week and maintained a wait-and-see stance after wrapping up its first monetary policy meeting of 2020.
"Our business is starting 2020 stronger than we finished 2019, as we saw a dramatic downturn in orders over the last four months of 2019," said an executive from the fabricated metal products industry. "Orders are up to start the year, but slightly behind where they were one year ago."
"The lack of faith in the economy seems to be why we cannot sell capital projects," said an executive from the machinery industry.
According to a survey recently released by the National Association for Business Economics, about two-thirds of respondents expect inflation-adjusted U.S. GDP to increase by 1.1 percent to 2.0 percent over the next four quarters.
The Purchasing Managers' Index (PMI) stood at 50.9 percent, an increase of 3.1 percentage points from the seasonally adjusted December reading, and the highest since July last year.
The PMI dropped to a revised 48.8 percent in August 2019, indicating the first contraction in a decade. In September, the index fell further to 48.2. In December, the index hit 47.8, the lowest since June 2009. Any reading below 50 percent indicates the manufacturing sector is generally contracting.
"Global trade remains a cross-industry issue, but many respondents were positive for the first time in several months," Timothy Fiore, chair of the ISM's manufacturing business survey committee, said in a statement. "Overall, sentiment this month is moderately positive regarding near-term growth."
Of the 18 manufacturing industries, eight reported growth in January, while eight reported contraction. "Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, followed closely by Computer & Electronic Products. Petroleum & Coal Products is the weakest," said Fiore.
Bloomberg economist Eliza Winger said the January reading likely reflects the positive impact of the phase-one trade deal between the United States and China.
"However, we are expecting the uptick to be temporary as the Boeing production halt and recent uncertainties in response to the coronavirus outbreak may stress global supply chains," Winger said.
During the 12 months of last year, the PMI averaged 51.2, the lowest in a decade, and down by 7.6 percentage points from 2018.
The U.S. economy in the fourth quarter of 2019 expanded at an annual rate of 2.1 percent, ending the year with an annual growth of 2.3 percent, according to recent data from the U.S. Commerce Department.
The gross domestic product (GDP) growth slowed in 2019, compared to 2.9 percent in 2018, primarily reflecting decelerations in nonresidential fixed investment and personal consumption expenditures (PCE) and a downturn in exports, the report said.
"Rate cuts by the Federal Reserve helped to blunt the effects of weaker growth abroad and trade wars in 2019," wrote Diane Swonk, chief economist at Grant Thornton, a major accounting firm, noting that the central bank's rate cuts partially offset losses in manufacturing with a "turnaround" in the housing sector.
The U.S. Federal Reserve lowered rates three times in 2019, amid growing uncertainty stemming from trade tensions, weakness in global growth and muted inflation pressures. These policy adjustments put the current federal funds rate target range at 1.5 percent to 1.75 percent.
The Federal Open Market Committee, the Fed's policy-setting body, left interest rates unchanged last week and maintained a wait-and-see stance after wrapping up its first monetary policy meeting of 2020.
"Our business is starting 2020 stronger than we finished 2019, as we saw a dramatic downturn in orders over the last four months of 2019," said an executive from the fabricated metal products industry. "Orders are up to start the year, but slightly behind where they were one year ago."
"The lack of faith in the economy seems to be why we cannot sell capital projects," said an executive from the machinery industry.
According to a survey recently released by the National Association for Business Economics, about two-thirds of respondents expect inflation-adjusted U.S. GDP to increase by 1.1 percent to 2.0 percent over the next four quarters.
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