The Jan Chicago PMI was a solid 68.8 vs expectations of 64.5 and up from 66.8 in Dec. It’s the highest since 1988 but measures the direction of improvement, not the degree but an impressive figure nonetheless. New Orders rose another 4.4 pts to 75.7, the highest since 1983. Backlogs rose a touch. Importantly, the Employment index rose 5.7 pts to the best since 1984. Inventories fell 5.5 pts but remains above the 6 month avg. Within the strong data however came a continued rise in inflation pressures as the Prices Paid component rose almost 4 pts to 81, the highest since July ’08. Bottom line, the data speaks for itself in that manufacturing continues to be a strong support to the economic recovery but the rise in commodity prices is becoming more of an issue where the rubber now meets the road on whether companies will have success of passing them thru, will eat them instead or will experience a likely combination of both.
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