The U.S. Institute for Supply Management Index almost clawed its way out of recession territory in January.

The ISM index (formerly known as NAPM) came in at 49.9 today. Any reading above 50 indicates that the manufacturing sector is expanding.

RBC Financial Group economists say the rise of the ISM index “is encouraging. Details of the report were also bullish on future growth prospects. The new orders, production and employment components of the index all improved in the month. The downturn in the manufacturing sector that precipitated the recession looks to be coming to an end. The rise in overtime hours worked in January along with the improvement in the ISM index suggest that the long awaited up-tick in industrial production is not far behind.”

BMO Nesbitt Burns says that stronger readings on production and orders, while employment and inventories are still falling sharply, “is a classic mix that signals a broad turn in the factory economy”.

“We believe the inventory rundown has nearly concluded and a pop in production lies directly ahead for most industrial sectors. Canadian factories will benefit considerably from thawing conditions in the U.S.,” BMO says. “Things are getting better, but slowly, as chairman Greenspan suggested.”

http://www.bmonb.com/Economics