Published: Sat, January 13, 2018
Finance | By Loren Pratt

USA manufacturing surges in December, ISM shows

USA manufacturing surges in December, ISM shows

The Institute for Supply Management recently unveiled its Report on Business, containing the manufacturing sector's Purchasing Managers Index for December.

The group's manufacturing index, known as the PMI, was 59.7%, up from 58.2% in November, according to a monthly report.

The new orders index increased to 69.4 in December from 64 the month before, marking the highest reading since January 2004, when the index came in at 70.6. The production index also climbed to 65.8 in December from 63.9 in November, indicating a decent acceleration in the pace of growth. In general, the labor market has tightened considerably, with the employment index averaging 59.3 over the past five months, up from a more modest 52.8 one year ago.

While growth in New Orders is obviously a positive indicator for manufacturers, some struggles have accompanied this growth. Price increases continued at a faster rate. Eight of the ten index components grew, while the inventories and customers' inventories indexes both contracted. Ten industries reported higher inventories, while seven reported a decrease. This indicates a slower pace of deliveries as production strives to keep pace with a growing number of new orders.

Andrew Hunter, US economist at Capital Economics, said the rebound in the ISM manufacturing index leaves it close to a 13-year high and at a level that historically has been consistent with GDP growth accelerating to more than 4% in annual terms.

Of the 18 manufacturing industries surveyed in December, 16 reported growth.

Read the ISM release.

Spending on private residential projects jumped to its highest level since February 2007 and it follows other recent numbers showing a boom in home building.

Manufacturers expected to see six months of price increases for some raw materials in the wake of the late summer hurricanes - especially Hurricane Harvey's hit to the key chemical and oil production facilities in Houston.

Like this: