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US Factory Activity Falters in January

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U.S. factory activity isn’t off to such a great start this year—it shrank in January for the fourth straight month despite a rise in new orders as manufacturers were faced with too much capacity and not enough demand.

The Institute for Supply Management’s (ISM) national report put the January Purchasing Managers’ Index (PMI) at 48.2 percent (below 50 points to contraction) up a touch from 48 percent in December.

“The contraction in manufacturing is ongoing but no longer getting worse,” the Wall Street Journal reported ITG Investment Research chief economist Steve Blitz as saying.

New orders were up 2.7% to 51.5% and production moved 0.3% to 50.2%, a sign that factory conditions may be stabilizing. Though new orders were up in manufacturing in general, apparel reported a decrease in new orders and production in January.

Customers’ inventories overall were flat to December, indicating that the inventories are too high, but textile mills reported customer inventories as too low in the month.

When it came to prices, apparel manufacturers and textile mills said they paid less for raw materials in the month. Raw materials have been down across manufacturing for the last 15 months.

Manufacturing activity across the globe has seen somewhat of a downturn following a fairly turbulent economic year—slowed growth in powerhouse countries like China, currency fluctuations and a strong dollar that made American exports pricier for foreign buyers, plus general dips in demand.

China’s manufacturing activity came in at 49.4 in January, its sixth consecutive month of factory activity contraction and its lowest level since 2012, according to a reading compiled by Markit.

The eurozone saw factory activity contract to 52.3 from December’s 53.2 in the month.

Markit’s report on U.S. manufacturing activity painted a slightly rosier picture than the ISM report, putting American factory activity in expansion territory, if only slightly.

The data provider said consumer goods was one of the best performing sectors in the month and registered the fastest growth in new orders.

“The January results follow a year in which the sector data signaled broad-based growth of the U.S. economy, with all of the surveyed sectors recording solid expansions on average in 2015,” Markit said.

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