The manufacturing PMI rose from 49.4 in December to 50.1 in January, signaling an expansion in business conditions within the goods-producing sector halting the 6-month long deterioration seen from July to December.

The services PMI grew to 52.8, signalling expansion but at a slower rate than December's high of 56.8. This is a 9-month low for the flash US service PMI.

Future sentiment remained unchanged in January, maintaining December's high which was the highest since May 2022. Employment also rose in January for the second month in a row after 4 months. January marks the fastest rate of employment growth in two and a half years.

Details for manufacturing include a 2.5-point rise in output to 50.2, a 6-month high with new orders rising after a persistent 6-month long decline.

Inflationary pressures intensified in January. After cooling down slightly in December input cost inflation rose sharply along with average selling price which rose at an accelerated rate for the second month in a row.

The PMI composite rose to 52.4, down from 55.4 in December reaching a 9-month low. This signaled a slower rate of expansion of business activity. By sector, this slow down weighed heavily on services economy where output reached its slowest since April. Manufacturing on the other hand rose marginally, showing subtle improvements.

Notwithstanding the surprising recovery in the Philly Fed manufacturing index for January, forecasts look for another contractionary PMI manufacturing report, offset in the composite by rising strength in services. Forecasts call for PMI manufacturing down to 48.9 from 49.4 and services at 56.7 versus 56.8 in the December final.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector output by combining information obtained from surveys of around 1,000 manufacturing and service sector companies. The flash data are released around 10 days ahead of the final report and are typically based upon around 85 percent of the full survey sample. The report tracks changes in variables such as new orders, stock levels, employment and prices across both manufacturing and services. Production is also tracked, defined as"production" for manufacturing and"output" for services. Results are synthesized into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster output is growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The data are produced by S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.