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ISM Surprises, Buoyed by Jump in New Orders

The ISM manufacturing index reached a 15-month high in January, propelled by the most substantial growth in orders since May 2022. The index rose by 2 points to 49.1, surpassing the expected reading of 47.

The new orders index experienced a significant jump of 5.5 points, marking the largest monthly increase in over three years, supported by strong demand in the latter half of 2023. Production expanded for the first time in four months, and a measure of customer inventories revealed the lowest stock levels since October 2022.

Our Take: There is a resurgence in both sentiment and activity within the manufacturing sector, indicating that the low point of 2023 is likely past. The sharp increase in new orders, a leading indicator for production, suggests further improvement in PMI readings in the upcoming months. This trend does not support the likelihood of a policy rate cut in March.


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