Business activity in the U.S. Midwest expanded in January for a ninth straight month and at the fastest pace in almost a decade, a report showed Friday.
The National Association of Purchasing Management-Chicago business barometer jumped to 65.9 from 61.2 in December.
Economists had forecast the index at 62.0. A reading above 50 indicates expansion in the sector.
Because Chicago is the economic hub of the Midwest, many view the NAPM-Chicago report as a litmus test of U.S. factory output, although both manufacturing and service sector companies are included in the index.
Economists liked what they saw:
“Manufacturing activity, which has been the U.S. economy’s weakest link, may have firmed decisively,” said John Lonski, chief economist at Moody’s Investors Service.
One dull spot in the report was the employment index, which slipped to 48.3 from 49.6 in December and continues to suggest a reluctance among employers to take on new staff.
Other components were strong. Prices paid rose to 67.8 and new orders jumped to 69.7. The production index surged to 76.5 while new orders came in at 69.7. Inventories, which are not used to calculate the index, dropped to 37.4.
Treasury prices slipped on the data after rallying earlier on weaker-than-expected fourth-quarter GDP data, while U.S. stock prices remained lower on the day.
“This tells us to discount the importance of the lower-than-expected reading of the 4th quarter GDP and instead turn our focus to the strong start to 2004,” said Lonski.