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US manufacturing growth gathers steam in January: ISM

Thursday, February 2, 2017 - 00:08

[WASHINGTON] US manufacturing activity expanded in January for the fifth consecutive month as production, employment and prices all improved, and orders held steady, the Institute for Supply Management said Wednesday.

The ISM manufacturing index rose 1.5 points to 56 per cent - the highest since November 2014 - with a strong majority of the industries surveyed reporting growth.

A reading in the purchasing managers index above 50 indicates growth and the index was better than the consensus forecast of 55 per cent.

Coming as it does hours before the Federal Reserve monetary policy decision, the report offers a further sign of a strengthening economic recovery but it is unlikely to prompt an immediate increase in the benchmark interest rate.

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Market voices on:

Jim O'Sullivan, chief US economist at High Frequency Economics, said the report was more evidence of "upward momentum" in the economy.

However, he noted, "we suspect some of the current strength reflects a temporary post-election rise in confidence rather than any significant change yet in underlying trends."

The gain in the overall ISM index was fueled by a two-point jump in the production component to 61.4 per cent, the highest since November 2014; and a more than three-point increase in the employment index to 56.1 per cent.

Of the 18 industries surveyed, 10 reported employment growth and a much higher percentage saw hiring rise compared to December.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said, "Stronger demand from China is part of the story, but growth in Europe likely is helping too."

However, he noted, "The downside is the increasing upward pressure on prices."

The ISM prices paid index rose 3.5 points to 69.0, the highest since May 2011.

AFP

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