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US Manufacturing Growth Hits One-Year Low

The market may be abuzz about Made in USA, but despite manufacturing production volumes rising robustly in January, new orders are expanding at the slowest pace in 12 months.

According to financial information services firm Markit Economic, the U.S. Manufacturing Purchasing Manager’s Index (PMI) dipped to 53.7 in January from 53.9 in December, according to a report released Friday. The composite index is based on five individual indices: new orders, output, employment, suppliers’ delivery times and stocks of items purchased.

Though coming in above the threshold of 50, which indicates growth over contraction, the latest PMI was the lowest in a year.

“Business conditions continued to improve among US factories at the start of the year, though the rate of growth continued to cool from the scorching pace seen in the summer months,” Markit chief economist Chris Williamson said. “The slowdown is being led by a weakening inflow of new orders, but the good news is that demand remained strong enough to drive yet another month of robust job creation at factories. Producers are also benefitting from the recent oil price slide, which helped reduce overall input costs for the first time for two-and-a-half years.”

On Friday, the national average gas price was $2.038 and the number is expected to fall below $2.

U.S. manufacturers registered a slight reduction in overall cost burdens in January—linked mainly to declining oil prices, ending a 29-month period of input price inflation.

Survey respondents reports suggested that improving domestic economic conditions boosted new order levels, but overall export demand was “lackluster.”

Williamson added, “The ongoing growth of output and employment signaled by the survey suggest that the process of gradually raising interest rates to more normal levels could be underway by mid-year. However, lower manufacturing costs resulting from the recent oil price rout should drive inflation down further in coming months, providing policymakers with greater leeway to ensure the process of tightening policy is very gradual, keeping interest rates low for longer.”