US: ISM manufacturing highlights upsides for growth - ING

Another strong reading shows US manufacturing hasn't been negatively impacted by bad weather, adding to the case for more rate hikes from the Federal Reserve noted James Knightley, Senior Economist at ING.

Key Quotes: 

“The US ISM manufacturing report for January shows the headline balance coming in slightly above expectations at 59.1 versus the 58.6 consensus. It is down modestly from December but remains very close to the strongest reading since 2004.”

“Employment was a bit softer at 54.2 versus 58.1 previously, but this is still indicative of healthy jobs growth.”

“Price pressures are intensifying with the prices paid component hitting 72.7 from 68.3 – the highest reading since May 2011 with every single industry surveyed reporting higher prices.”

“We expect to see ongoing strength in manufacturing data. The 4Q GDP report showed a sharp run-down in inventories, which we think will be replenished in the first half of this year, while export demand will continue to grow, helped by the dollar’s declines. At the same time, tax cuts have lifted business sentiment and the sector is creating jobs in significant numbers.”

“Today’s report also suggests that activity hasn’t been unduly impacted by bad weather at the start of the year, which will intensify expectations of Fed interest rate hikes.”