The Jan ISM mfr’g index was 60.8, above expectations of 58, up from 58.5 in Dec and its the best since May ’04. New Orders rose almost 6 pts to 67.8 and Backlogs rose 11 pts to 58. Also positively, the Employment component rose almost 3 pts to 61.7, the best since 1973 (not a typo). Inventories at both the mfr’g level and customer rose and the Export component rose 4.5 pts. As mentioned yesterday, the data measures the direction of change, not degree but clearly reflects a continued improvement in mfr’g. The news though comes with the specter of growing inflation pressures as the Prices Paid component rose 9 pts to 81.5, the highest since July ’08. Of 18 industries surveyed, 14 reported growth. Bottom line, mfr’g continues to reflect strong growth but with rising input costs that will be eaten in part and passed on in part and the 30 yr bond yield is rising to the highest since Apr ’10 in response.
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