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Economic Watch: Manufacturing Surges, Construction Scores Record High

13 January 2018

Growth in the US economy's manufacturing sector unexpectedly improved in December, according to data from the US Institute for Supply Management.

In December, the PMI came in at 59.7%, which marked a 1.5% jump from November's reading (58.2%).

The production index gained almost two points to 65.8 per cent, while new orders surged 5.4 points to 69.4 per cent, the strongest since January 2004 and marking seven straight months above 60. The production index also climbed to 65.8 in December from 63.9 in November, indicating a decent acceleration in the pace of growth.

The strength in almost every industry created "a really strong report" meaning the sector is now in its 16th consecutive month of expansion, explained Timothy Fiore, chair of ISM's Manufacturing Business Survey Committee. That's the fastest pace of new orders since January 2004.The employment index was one of the only weak spots, falling to 57 from 59.7. A reading above 50% indicates economic expansion and below 50% indicates contraction. In other news, inventories (up from 47.0 to 48.5) contracted for the third straight month. "The customers' inventories index declined and remains at low levels".

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"The upbeat mood is underscored by an increased appetite to hire new staff, with the survey indicating that factory payroll numbers are rising at a rate not seen for over three years".

New orders to manufacturers was the report's major highlight, reaching an nearly 14-year-high, ISM said. "However, the strengthening of demand for raw materials has led to supply chain delays, which have in turn been increasingly linked to higher prices as a sellers' market develops".

The November level is also 2.4% higher than compared to the same time a year ago while the level in the first 11 months of 2017 is 4.2% higher than during the first 11 months of 2016.

According to ISM, any reading above 50 points shows an increase in factory activity. The headline number in the latest survey was boosted by healthy gains in new orders (up from 64.0 to 69.4), as noted above.

Economic Watch: Manufacturing Surges, Construction Scores Record High