NEW YORK: US manufacturing expanded in December at the fastest pace in three months, as gains in orders and production capped the strongest year for factories since 2004, the Institute for Supply Management said on Wednesday.

Highlights of ISM manufacturing: Factory index climbed to 59.7 (est. 58.2) in December from 58.2 a month earlier; readings above 50 indicate expansion. Gauge of new orders advanced to 69.4, the highest in nearly 14 years, from 64 Measure of production increased to 65.8, the strongest since May 2010, from 63.9

Key takeaways: The survey-based measure of factory activity – the year’s second-highest behind September, when storm-related supply delays boosted the index – brings the 2017 average to 57.6, the best in 13 years.

The latest gain extends a string of strong readings that’s been fueled by more domestic business investment, improving global economies and steady spending by American households.

The acceleration in bookings indicates production will remain robust in coming months as factories race to limit mounting order backlogs amid declining customer inventories. Increasing export orders underscore improvement in global markets.

The figures suggest manufacturing strength will persist into early 2018, even after the ISM’s semi-annual survey of purchasing managers published last month showed factories anticipate growth in capital spending to slow this year.

“Bloomberg Economics’ assessment that the dip in the November ISM headline was a headfake proved accurate. This was due to the alleviation of bottlenecks following the hurricanes, whereby supplier deliveries weighed on the headline.

The December results showed a payback for this effect. However, it was not just that, as enthusiasm for the tax reform bill’s passage bolstered business confidence.

This may not be the end of the ISM’s climb, as both new orders and production posted further gains in the month. Business sentiment has been high enough for long enough that it is actually starting to drive the ‘hard data’ in a positive direction,” according to Carl Riccadonna and Yelena Shulyatyeva of Bloomberg Economics.

Bloomberg / The Washington Post Service

Published in Dawn, January 4th, 2018