The January Purchasing Manager’s Index (PMI) rose to 50.9 in January, up from 47.8 in December. The PMI is a leading indicator of economic activity as it measures orders placed by specific industry segments. Any number below 50 represents contraction in manufacturing, while values above 50 indicate manufacturing growth. January’s number snapped a five-month streak of contraction. One reading does not prove a trend and this is demonstrated by the fact
that eight sectors reported expansion and eight reported contraction.
One sign that perhaps this is a trend is a spike in the number of machine tools ordered in December. Orders were up 24% compared to November, totaling over $400 million in sales. Industry sources speculate that manufacturers were reluctant to pull the trigger on orders due to economic uncertainty. The reason for the renewed optimism was not clear and runs counter to the manufacturing slowdown expected from the halt in 737 MAX production. Election uncertainty, trade policies and coronavirus are contributing to a lack of clarity and these factors may not have a quick resolution.