The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the Institute for Supply Management (ISM) Index for January 2013.  

“The Institute for Supply Management (ISM) Index was 53.1 in January 2013, up quite sharply from 50.2 in December. An index level of 50 is the dividing line between growth and decline,” Meckstroth noted. “The January report was very positive, showing orders, production, and employment substantially improved from December 2012.

“A strong ISM report, combined with the employment numbers for January from the Bureau of Labor Statistics showing a modest 4,000 additional manufacturing jobs, is a good start to the year,” he added. “Despite the political uncertainty over the debt ceiling, sequester, and federal government shutdown deadlines all coming up in the first half of this year, industrial activity continues to grow. All households saw a tax increase in January with the expiration of the 2 percent payroll tax cut, and high income taxpayers faced higher marginal rates and new health care taxes. Despite the headwinds, the strong improvement in housing starts, solid growth in motor vehicle production and widespread modest gains across many industries are driving manufacturing activity.

“We believe that higher taxes and sluggish job and wage growth will constrain the economy to a relatively slow pace of growth in 2013” Meckstroth concluded. “Manufacturing industrial production seems to be coming out of a lull and is forecast to increase 2 percent in 2013 compared to 2012.”