American manufacturing roared back to life in January

The manufacturing sector roared back to life to start 2016.

Markit economics’ preliminary US manufacturing purchasing manager’s index (PMI) for January released Friday morning was 52.7, beating the forecast for 51.

The prior reading was a 38-month low of 51.2. A reading above 50 is in expansionary territory, and below that, contractionary.

The manufacturing sector suffered big setbacks in 2015, as the dollar rallied, global demand weakened, and commodity prices crashed.

However, this latest report indicates that the sector has found “a new lease of life at the start of the year”, according to Markit chief economist Chris Williamson.

There was improvement in virtually every segment that Markit monitors, all thanks to a solid US economy. The report noted a “solid upturn” in production volumes, and stronger volumes of new work.

The only big drag on the headline index was a slowdown in the pace of manufacturing jobs growth to the slowest in four months.

Markit noted that export sales rose at a negligible pace, although most companies that reported progress cited stronger domestic economic conditions. Most of the people who said otherwise were seeing a reduction in orders from the energy sector amid the plunge in commodity prices.

“Producers appear to have shrugged off worries about China, helped by export orders showing signs of reviving,” Williamson said. “It looks like weak demand from China is being offset by improved demand for US-produced goods in other markets.”

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