U.S. manufacturing sector expands in January amid COVID-19 spikes

The U.S. manufacturing sector expanded at a slower pace in January, marking the eighth consecutive month of growth, the Institute for Supply Management (ISM) reported Monday.

The Purchasing Managers' Index stood at 58.7 percent, down 1.8 percentage points from the December reading, indicating a continued recovery in the manufacturing sector after contracting in March, April and May last year.

Any reading above 50 percent indicates the manufacturing sector is generally expanding.

"Survey committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are continuing to cause strains that limit manufacturing growth potential," said Timothy Fiore, chair of the ISM's manufacturing business survey committee.

Fiore, however, noted that panel sentiment remains optimistic -- three positive comments for every cautious comment -- similar to December levels.

"Manufacturing activity continues to grow at an impressive pace, but has not escaped the economy's recent slowdown," Sarah House and Tim Quinlan, senior economists at Wells Fargo Securities, wrote in an analysis.

According to data released last week by the U.S. Commerce Department, the U.S. economy grew at an annual rate of 4 percent in the fourth quarter of 2020 amid surging COVID-19 cases, much slower than 33.4 percent in the previous quarter.

Despite a partial economic rebound in the second half of last year, the U.S. economy shrank 3.5 percent for the whole year of 2020, marking the largest annual decline of U.S. gross domestic product since 1946, the data showed.