US manufacturing sector expands at fastest pace in nearly 14 years - ISM

Growth in the US economy’s manufacturing sector unexpectedly rose in February, according to data from the Institute for Supply Management.

The ISM’s headline manufacturing index increased to 60.8 from 59.1 in January, beating expectations for a drop to 58.7.

A reading above 50 indicates expansion, while a reading below signals contraction.

Timothy R. Fiore, chair of the ISM, said: "This indicates growth in manufacturing for the 18th consecutive month at strong levels led by continued expansion in new orders, production activity, employment and inventories, with suppliers continuing to struggle delivering to demand. The PMI at 60.8 is the highest level of expansion seen since May 2004, when it reached 61.4."

The new orders index fell to 64.2 from 65.4, while the production index slipped to 62 from 64.5. The employment index came in at 59.7 from 54.2 and the prices paid index printed at 74.2 compared to 72.7 in January.

Andrew Hunter, US economist at Capital Economics, said the rise in the ISM manufacturing index suggests that growth is set to pick up following a soft start to the year.

"On past form, the index is consistent with real GDP growth of more than 5% annualised. In an encouraging sign for February’s employment report due next week, the rise was mainly driven by a jump in the employment index to 59.7, from 54.2. The new orders and production indices both edged lower, but they remained at a high level by past standards. Indeed, the production index is still consistent with manufacturing output growth of more than 4% annualised.

"Looking ahead, the weaker dollar and strong global backdrop should continue to support exports, while domestic demand is set to be boosted by the recent fiscal stimulus. This all suggests that, although the rapid growth in manufacturing output seen at the end of last year may not be sustained, prospects for the sector over the months ahead remain bright."