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United States manufacturing activity jumps in December

13 January 2018

Manufacturing sizzled in December, reaching an nearly seven-year high, led by new orders and production, the Institute for Supply Management (Tempe, AZ) said today.

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.

Meanwhile, the employment index ticked down to 57 from 59.7 in November and the production index printed at 65.8 from 63.9 a month earlier.

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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. That indicated that manufacturers were still adding jobs but at a slower rate. Eight of the ten index components grew, while the inventories and customers' inventories indexes both contracted.

Another area to watch is prices, given the prospects for earnings and inflation, and that index jumped 3.5 points to 69 per cent, which means it has been rising for 22 months as 17 of 18 industries reported increases.

Only the Wood Products and Textile Mills industry segments reported declining numbers in December.

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A headline reading above 50 indicates that the manufacturing economy is generally expanding, below 50 indicates that it is generally contracting.

According to ISM, any reading above 50 points shows an increase in factory activity. The December index was up from 64% in November. The production index was like the one for new orders in terms of its overall strength, exceeding 60 since its June reading. The average lead time for production materials remained at 59 days, while MRO supplies decreased by one to 36 days. Heading into 2018, it will be interesting to see if these trends continue or if production levels can pace closer to new orders.

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United States manufacturing activity jumps in December