US Economy: Manufacturing Activity Turns to Expansion

■ Manufacturing has returned to expansion, with a significant rebound in business activity.  

■ Job vacancies have decreased, but inflation expectations remain high. 
 
The Job Openings and Labor Turnover Survey (JOLTS) for December showed a sharp decline in job vacancies (6.542 million, a decrease of 386,000 from the previous month). The decline was primarily in the service sector, with retail sales experiencing a pullback due to a rebound in labor demand ahead of the year-end sales season. Furthermore, the decline was particularly pronounced in professional and business services, indicating a shift towards progress in artificial intelligence (AI) substitution. 
 
The ISM Business Climate Index for January showed a significant increase in manufacturing (52.6, up 4.7 percentage points from the previous month), while non-manufacturing (53.8, unchanged from the previous month) remained at a high level. Manufacturing has exceeded 50 again after a year, returning to expansion, and this expansion is the strongest since August 2022. Production and new orders expanded rapidly, while the pace of hiring contraction slowed. Non-manufacturing also maintained its expansionary momentum, confirming that overall business activity remains healthy. 

 
The preliminary February University of Michigan Consumer Survey showed that the consumer confidence index (57.3, up 0.9 percentage points month-over-month) rose for the third consecutive month. The present situation index rose, while the expectations index fell for the first time in four months. Consumers' inflation expectations for the next year (3.5%) declined, while their inflation expectations for the next five years (3.4%) rose, still anticipating inflation to remain above 3%.