- Bradley Holcomb, chairman of the ISM's survey committee
The US manufacturing sector shrank for a fourth consecutive month in January, while employment in the sector plunged to the lowest level in more than six years. According to the Institute for Supply Management, the index for national factory activity climbed to 48.2, up from a revised December's 48.0, with any reading below the crucial 50-mark threshold indicating contraction of the sector. The new orders index rose to 51.5, up from 48.8 in December, whereas the employment index plummeted to 45.9 in January, compared with 48.0 in the prior month. A measure of exports plunged four points to 47, the lowest reading since September.
Separately, US consumer spending remained flat in December, while personal income beat expectations. The Commerce Department reported that personal spending was flat following a revised November's gain of 0.5%, missing forecasts for a gain of 0.1%. Meanwhile, personal income rose by a seasonally adjusted 0.3%, surpassing expectations for a 0.2% gain and following a 0.3% increase a month earlier. At the same time, the core PCE price index was flat last month, below expectations for a gain of 0.1% and after rising 0.2% in November. The core PCE price index rose at an annualized rate of 1.4%, in line with estimates and unchanged from a month earlier. The Fed uses core PCE as a tool to help determine whether to hike or cut interest rates, with the aim of keeping inflation at a rate of 2% or below.
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