trending Market Intelligence /marketintelligence/en/news-insights/trending/z-wjphcslltxjfvoakpzeg2 content esgSubNav
In This List

US manufacturing expands at fastest pace in more than 2 years

Blog

Using ESG Analysis to Support a Sustainable Future

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook


US manufacturing expands at fastest pace in more than 2 years

The U.S. manufacturing sector expanded at its fastest pace in two-and-a-half years in January 2018 as production and new orders grew more quickly then they have in a year.

IHS Markit's final US manufacturing purchasing managers' index, or PMI, increased to 55.5 in January from 55.1 in December 2017. Production growth accelerated because of higher inflows of new work and more favorable economic conditions. Total new orders rose to their highest level since January 2017, driven by greater domestic demand and the largest gains in new foreign business in more than a year.

Purchasing activity increased at the fastest rate since September 2014 and pre-production inventories increased at the fastest pace in 12 months. Greater raw material prices and higher transport costs resulted in an increase in input costs, while output charge inflation quickened during the month.

"The acceleration of manufacturing growth and upward price trends are grist to the mill for Fed hawks, adding to the likelihood of interest rates rising in March," said Chris Williamson, chief business economist at IHS Markit.

Another indicator of the manufacturing sector's health showed that the pace of expansion slowed slightly from the previous month. The Institute for Supply Management's PMI edged down to 59.1% in January from 59.3% in December 2017 as the new orders index decreased by 2 percentage points and the production index declined by 0.7 of a percentage point from the previous month.

"This indicates growth in manufacturing for the 17th consecutive month at strong levels led by continued expansion in new order and production activity, with employment growing at a slower rate and supplier deliveries continuing to struggle," said Timothy Fiore, chair of ISM.

"The past relationship between the PMI and the overall economy indicates that the average PMI for January (59.1%) corresponds to a 4.9% increase in real gross domestic product (GDP) on an annualized basis," Fiore said.