While it has been a relatively quiet US economic calendar to kick off the New Year, the data we did get was better than expected.  The most notable of them all was the ISM Manufacturing report for the month of December.  Economists were expecting a headline reading of 53.8, but the actual reading came in notably higher at 54.7, which was the highest level in exactly two years.

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Not only was the headline reading strong, but the internals were also mostly to the upside.  On a month/month basis, just two components declined, while on a year/year basis only one component declined.  The biggest gainers this month were Prices Paid, New Orders, and Production.  In the case of Prices Paid, that index rose 11 points to 65.5, which was the highest monthly reading since June 2011 (chart below).  While the 11-point increase was large, we saw an even larger one-month increase back in March when the Prices Paid component surged 13 points.

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