Economic Watch: Manufacturing Surges, Construction Scores Record High

Chart illustrating Purchasing Managers Index growth

USA factory activity rose more than expected in last December, the latest sign of strong US economic momentum, the data released by The Institute for Supply Management (ISM) revealed on Wednesday.

The group's manufacturing index, known as the PMI, was 59.7%, up from 58.2% in November, according to a monthly report. Also increasing with the PMI was the new orders index, which rose to 69.4% from 64% the previous month. The employment index dropped to 57.0 in December from 59.7 in November, although the reading above 50 indicates the fifteenth consecutive month of job growth in the manufacturing sector.

"The only mild disappointment here is a 2.7-point dip in the employment component, but it's still high at 57.0, and overall this is a very strong report".

ISM's semi-annual forecast released last month showed 65 per cent of firms surveyed had difficulty hiring new employees and 44 per cent increased starting pay to attract new workers. This indicates a slower pace of deliveries as production strives to keep pace with a growing number of new orders.

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ISM said 16 of 18 industries reported economic expansion in December. The Customer Inventories Index registered 42 percent in December, which is 3.5 percent lower than November.

While growth in New Orders is obviously a positive indicator for manufacturers, some struggles have accompanied this growth. In other news, inventories (up from 47.0 to 48.5) contracted for the third straight month. Even better, the rise in the headline index reflects a 5.4-point jump in the new orders index to 69.4, the highest since Jan 2004.

The latest data brings the average reading in 2017 to 57.6, the highest level in 13 years. Order backlogs have grown for 11 consecutive months.

Of the 16 industries reporting growth in December, the machinery, chemical, and computer and electronic products sectors reported the biggest gains.

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