U.S. factory activity expands at lower rate, new orders weigh

NEW YORK, Jan 23 (Reuters) - The U.S. manufacturing sector continued to expand in January but at a slightly slower pace than the month before, matching the lowest reading in a year, an industry report showed on Friday.

Financial data firm Markit said its preliminary or "flash" U.S. Manufacturing Purchasing Managers Index fell to 53.7 in January, matching the 2014 low last January when severe weather impacted economic activity.

Economists polled by Reuters had expected the "flash" reading at 54.0, which compares to December's 53.9 final reading. A reading above 50 signals expansion in economic activity.

This month's output subindex rose to 55.1 from December's 54.7 final reading, while the employment subindex edged up to 53.4 from last month's 53.0. It was the 19th straight month of factory employment growth according to the report.

The new orders subindex, also above 50, hit its lowest in a year. Input prices contracted for the first time since July 2012.

"The slowdown is being led by a weakening inflow of new orders, but the good news is that demand remained strong enough to drive yet another month of robust job creation at factories," said in a statement Chris Williamson, chief economist at Markit.

"Lower manufacturing costs resulting from the recent oil price rout should drive inflation down further in coming months, providing policymakers with greater leeway to ensure the process of tightening (monetary) policy is very gradual."

Markit's "flash" reading is based on replies from about 85 percent of the U.S. manufacturers surveyed.

(Reporting by Rodrigo Campos, Editing by Chizu Nomiyama)