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Manufacturing sector remains sluggish at start of new year

Overall, January 2016 remained in "contracting" territory, according to the Institute for Supply Management's (ISM) Manufacturing Report on Business. However, there are a few signs of improvement mixed in with continued contraction in some areas. The January Purchasing Management Index (PMI) ticked up 0.2% to 48.2% from the December 2015 PMI of 48%, but that is still below the benchmark of 50.

The New Orders Index jumped into the growth area, up 2.7% to 51.5% for January. Production also moved onto the "growing" side of the benchmark to 50.2, up 0.3% from December's 49.9. The Employment Index dropped further from December's 48%, falling in January to 45.9%.

Supplier deliveries are virtually unchanged at 50 in January from December's 49.8%. Inventories remained unchanged in the "contracting" mode at 43.5%. Customer Inventories also remained steady but too high at 51.5%.

Prices treaded water in January's PMI at 33.5%, while Backlog of Orders moved upward by 2% to 43%, but still in contracting territory.

A few comments indicated some uncertainty remains in manufacturing. "Medical device continues to be strong," said one respondent in the miscellaneous category of the 18 industries tracked by the ISM.

"Overall demand is higher than expected for post-holiday season," commented a respondent from the Plastics & Rubber Products sector. However this industry sector was one of 10 reporting a contraction in January.

A respondent from the Computer & Electronic Products industry sector commented: "Huge rollout in wireless in 2016 across all markets. We should be very, very busy."

On Friday, Jan. 29, the Bureau of Economic Analysis (BEA) reported that real gross domestic production increased at an annual rate of 0.7% in the fourth quarter of 2015, an "advance" estimate by the BEA. In the third quarter of 2015, real GDP increased 2%.

According to the BEA, the deceleration in real GDP in the fourth quarter primarily reflected a deceleration in personal consumption expenditures and downturns in nonresidential fixed investment, exports, and state and local government spending that were partly offset by a smaller decrease in private inventory investment, a deceleration in imports and an acceleration in federal government spending.

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