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US Manufacturing Industry Remains Close to 20-month High

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US Manufacturing Industry Remains Close to 20-month High

US manufacturing output dipped slightly in December, but remained close to November’s 20-month high, according to Markit Group.

The PMI reading of 54.4 suggests the US manufacturing economy continued to expand at a strong pace toward the end of Q4. Analysts were expecting a slight improvement from the previous month’s 54.7 reading. A PMI above 50.0 signifies expansion, whereas a reading below that threshold indicates contraction.

December witnessed a marked improvement in overall business conditions, with higher production supporting the strongest rise in new jobs since March. Production was buoyed by an increase in new orders, which was triggered by growing client demand and new product offerings. The pace of manufacturing growth eased from the previous month, but remained in-line with the yearly average.

Improved economic conditions domestically and internationally helped US manufacturers attract new business. New exports increased for the third consecutive month, reflecting one of the longest month-on-month growth sequences in a year-and-a-half. Higher output requirements were reflected in the quantity of inputs purchased by manufacturers, which rose at the fastest pace in 20 months.

“Over the fourth quarter as a whole, manufacturing has enjoyed its best performance since the start of the year,” said Chris Williamson of Markit. “Growth of output looks to have accelerated to an [annualized] rate of approximately 4 percent or more, and is driving greater job creation.”

The US economy added more than 200,000 private payrolls in November, according to official government data. Twenty-seven thousand of these jobs were concentrated in manufacturing.

The monthly PMI suggests the US economy continues to overcome strong growth headwinds emanating from the 16-day government shutdown. With Congress reaching a historic bipartisan budget deal, fears of a second impasse disrupting economic activity have evaporated. The Federal Reserve is likely to take notice of the economy’s marked improvements over the past two months. This however won’t be enough to shift policymakers’ stance on quantitative easing, according to most economists, who expect the Fed to maintain the $85 billion pace of monthly bond-buying.

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