As we have seen in other recent reports, prices paid jumped sharply.... as in 2008 this should begin to cut into profit margins. However, backlog and new orders were very promising in this report.
- A gauge of prices paid increased to 81.5 from 72.5.
The data has the S&P 500 back to yearly highs as the "correction" (1 day) is already a distant memory. Hope you did not blink. :)
- Factory activity expanded in January at the fastest pace in nearly seven years, as manufacturers reported a sharp jump in new orders. The Institute for Supply Management said Tuesday that its index of manufacturing activity rose last month to 60.8. January's reading was the highest since May 2004. Any reading above 50 indicates expansion.
- The manufacturing sector bottomed out at 33.3 in December 2008, the lowest point since June 1980. It has helped drive growth since the recession ended in June 2009.
- Factories healthy pace of expansion is likely to continue in the coming months. Manufacturing firms surveyed by ISM said their backlog of orders jumped in January, pushing an index measuring that activity to 58 from 47.
- U.S. factories are also benefiting from rising overseas sales. The index of export orders jumped to 62 in January, from 54.5 the previous month. That matches a recent peak reached in May.
- The prices paid index, which measures whether manufacturing companies are paying more for raw materials, jumped sharply. That's a sign that inflation could pick up soon. If manufacturers are unable to pass on the higher costs, it could cut into their profit margins.