January 2011 ISM Reports

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Manufacturing exhibited considerable strength in January, with the Institute for Supply Management’s (ISM) PMI jumping by 2.3 percentage points. "The manufacturing sector grew at a faster rate in January as the PMI registered 60.8 percent, which is its highest level since May 2004,” said Norbert Ore, chair of ISM’s Manufacturing Business Survey Committee. "The continuing strong performance is highlighted as January is also the sixth consecutive month of month-over-month growth in the sector. New orders and production continue to be strong, and employment rose above 60 percent for the first time since May 2004. Global demand is driving commodity prices higher, particularly for energy, metals and chemicals."

For once, both Wood and Paper Products showed signs of improvement. Wood Products saw increases in new orders, production and employment. Although new orders and production increased for Paper Products as well, employment decreased while inventories rose. Both industries faced rising imports, but that was partially offset (for Paper Products, at least) by greater order backlogs.
 

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The pace of growth of the non-manufacturing sector also picked up again in January, thanks to a 2.3 percentage point (to 59.4 percent) increase in its NMI/PMI. Once again, Real Estate and Construction both shared in that expansion while Ag & Forestry contracted.

The rate of input price increases is the aspect of both reports that is most troubling. The prices-paid index rose a comparatively modest 2.6 percentage points for non-manufacturers, but manufacturers faced a 9.0 percentage point jump in their price index. Gasoline, #1 and #2 diesel, and paper were among the relevant commodities up in price; no relevant commodity was down in price. Neither was any relevant commodity described as in short supply.