Partly reflecting problems caused by a West Coast dock slowdown, the Institute for Supply Management released a report on Monday showing that U.S. manufacturing activity grew at a slower than expected pace in the month of January.
The ISM said its purchasing managers index fell to 53.5 in January from 55.1 in December, hitting its lowest level in a year.
While a reading above 50 indicates continued growth in the manufacturing sector, economists had expected the index to show a more modest drop to 54.5.
The drop by the headline index was partly due to a notable slowdown in the pace of growth in new orders, as the new orders index tumbled to 52.9 in January from 57.8 in December.
The production index also dropped to 56.5 in January from 57.7 in December, while the employment index slid to 54.1 from 56.0.
Bradley Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "The West Coast dock slowdown continues to be a problem, negatively impacting both exports and imports as well as inventories."
The report said the exports index fell to 49.4 in January from 52.0 in December, with the reading below 50 indicating a contraction.
On the other hand, the imports index inched up to 55.5 from 55.0, and the inventories index jumped to 51.0 from 45.5.
The ISM also said the prices index dipped to 35.0 in January from 38.5 in December, indicating a faster drop in raw materials prices.
Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, due to the port issues, it's tough to separate normal manufacturing activity from this logistical nightmare."
"But either way, as seen with the Q4 GDP data and with what is going on with overseas economy's, U.S. manufacturing has moderated from the strong pace seen during the summer and into the fall after the very difficult early part of 2014," he added.
Wednesday morning, the ISM is scheduled to release a separate report on activity in the service sector in the month of January.
Economists expect the ISM's non-manufacturing index to inch up to a reading of 56.5 in January after falling to 56.2 in December.
For comments and feedback: editorial@rttnews.com