Against a backdrop of strengthening 'hard' data, manufacturing surveys signaled a strong rebound in January.
S&P Global's Manufacturing PMI spiked from 47.9 in Dec to 50.3 prelim to 50.7 final in January.
ISM's Manufacturing PMI jumped from 47.1 (revised lower) in Dec to 49.1 in January, well above the 47.2 expected.
The jump in the S&P Global print, to its highest since September 2022, is the biggest since at least 2020.
While the PMI data was still below 50, it was above all but one estimates, and the 5.5-point increase in the orders index marked the largest monthly advance in more than three years.
The PMI's employment index deteriorated further (below 50 for the fourth month in a row).
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
“Manufacturers have started the year with a spring in their step. Business optimism about the year ahead has surged to its highest since early 2022 thanks to a jump in demand. New orders are rising at a pace not seen for over a year and a half, improving especially sharply for consumer goods as households benefit from signs of an easing in inflation and looser financial conditions.
“Factories are also showing signs of restocking, with some firms buying more inputs to support higher production in the coming months. Payroll numbers are also rising again as firms seek to build extra operating capacity, boding well for the upturn to gain further strength as we head through the first quarter.
However, amid all the exuberance, there is worrying trend:
“The brighter news is tempered by signs of factory costs rising on the back of supply delays, with costlier deliveries often linked to adverse weather and recent disruptions to global shipping. These higher costs are feeding through to increased prices charged for goods by factories, which rose in January at the fastest pace since last April.
Some renewed upward pressure on consumer prices could therefore appear in the months ahead if these supply-linked inflationary trends persist.”
It appears Powell was right to want "more confidence".