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Data released on Monday showed the US ISM Manufacturing index dropped to 58.7 in January. According to analysts at Wells Fargo, the manufacturing activity continues to grow at an impressive pace but has not escaped the economy’s recent slowdown.

Key Quotes: 

“The ISM manufacturing index slipped to 58.7 in January, led by a decline in new orders. Rising backlogs and low inventories, however, should keep production rolling at a strong rate in coming months. Supply disruptions due to capacity constraints and labor shortages remain a near-term headwind. Along with an improved demand backdrop, bottlenecks are sending input prices soaring.”

“While labor remains difficult to find, that hasn’t stopped manufacturers from stepping up hiring. The employment index rose to the 52.6, the highest reading since the pandemic and a sign that manufacturers are growing more confident about the outlook. Despite a full recovery in core capital goods orders and consumer goods spending, manufacturing employment remains 543K lower than in February of last year.”

“The ongoing bottlenecks and improved demand outlook has led to a rapid rise in input costs. The prices paid component rose to the highest level since 2011, with a myriad of inputs ranging from raw materials to shipping costs rising over the month.”