Manufacturing activity expanded in January for the first time after 26 consecutive months of contraction, the Institute for Supply Management said.

There were improvements in all five subindexes that make up the Purchasing Managers Index. Susan Spence, Chair of the Institute for Supply Management Manufacturing Business Survey Committee, explained:

“Three demand indicators (the New Orders, Backlog of Orders and New Export Orders indexes) are in expansion, and the Customers’ Inventories Index remains in ‘too low’ territory, contracting at a faster rate. A ‘too low’ status for the Customers’ Inventories Index is usually considered positive for future production.

"Although these are positive signs for the start of the year, they are tempered by commentary citing that January is a reorder month after the holidays, and some buying appears to be to get ahead of expected price increases due to ongoing tariff issues.

“Regarding output, the Production Index is in expansion for the third month in a row, and the Employment Index, though still in contraction, saw a 3.3-percentage point improvement. However, 66% percent of panelists still indicate that managing head counts is the norm at their companies as opposed to hiring.

“Finally, inputs (defined as supplier deliveries, inventories, prices and imports) were mixed, with the Supplier Deliveries Index indicating slower deliveries, the Inventories Index remaining in contraction and the Prices Index continuing to rise."