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American manufacturers outpace expectations: ISM

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American manufacturers outpace expectations: ISM

The United States’ manufacturing industry expanded at the fastest pace in two-and-a-half years in November, according to the Institute for Supply Management. The PMI index rose 0.9 percentage points to 57.3, the highest since April 2011. The median forecast of economists surveyed by Bloomberg was 55.1.

Manufacturing PMI is a closely followed indicator of business conditions in the manufacturing economy. A reading above 50.0 signifies growth, whereas a reading below that threshold signifies contraction.

New orders, increased production and brighter employment prospects were the biggest factors behind the monthly advance. Of the 18 total manufacturing sectors, 15 reported growth in November, led by plastics and rubber products, textile mills, furniture and primary metals. Apparel, wood products and machinery were the three industries reporting contraction.

The production index rose 2 percentage points to 62.8; factor employment increased to 56.5, the highest since April 2012. The index of orders waiting to be filled increased from 51.5 to 54.
“Seasonal demand has not decreased at the typical pace,” said one manager from the primary metals sub-sector.

“Incoming order rate remained strong,” said another manager from fabricated metal products.

The US manufacturing industry has expanded for six consecutive months, the longest streak since 2009. Manufacturing output continues to be one of the main factors behind the nation’s recovery. A hot housing market has led to more orders for home-related merchandise this year; growth in consumer demand and business investment has provided a bigger push for the nation’s manufacturers.

“With the government shutdown over, with global growth picking up, we’ll see solid growth in manufacturing,” said Gus Faucher of PNC Financial Services Group Inc.

The 16-government shutdown is believed to have cost the US economy more than $20 billion dollars. Market participants likely won’t know the true impact of the shutdown until the Commerce Department reports on fourth quarter GDP.

In a separate report, Markit Group said US manufacturing jumped to the highest level since January, driven by the same factors ISM listed. The Markit PMI reading of 54.7 is 2.9 percentage points higher than the previous month.

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