US manufacturing PMI shows world's biggest economy is strengthening before Trump presidency

Jasper Jolly
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Sparks are flying as the US manufacturing sector sees further improvement (Source: Getty)

The US economy’s growth is gaining pace according to an important measure of manufacturing activity, further signalling the strength of the nation’s recovery as the Barack Obama administration comes to an end.

The manufacturing purchasing managers’ index (PMI) rose to 54.1 in November, an increase of 0.7 percentage points since last month’s survey, compiled by Markit.

The increase pushed the index to its highest point since March 2015, indicating that manufacturers are feeling more confident about the economy’s prospects. Any score above 50 indicates net positive sentiment – although it has not been net negative since 2009 during the global financial crisis.

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Manufacturing output recorded its highest rise for over a year and a half to post a gain for the sixth consecutive month.

Positive sentiment (above 50) has grown rapidly in the last month

The figures come after US stock indices have soared to multiple all-time highs in the aftermath of the election of Donald Trump as US President-elect. He promised a massive fiscal stimulus in the form of unfunded infrastructure spending, which prompted investors to pour money into US equities.

The PMI figures show “signs of buoyant business conditions in the US manufacturing sector,” said Chris Williamson, chief business economist at IHS Markit.

“Despite the continued uncertainty about the direction of the Trump administration, the manufacturing sector appears to be standing on an increasingly firm footing,” said Paul Sirani, chief market analyst at Xtrade.

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“Both production and order books are growing at impressive rates, fuelled predominantly by rising domestic demand for goods from both consumers and businesses. Companies are also rebuilding stock levels, suggesting the recent inventory drag is easing,” IHS Markit’s Williamson added.

The stock market rises were accompanied by a steep rise in the value of the dollar, but as with all currency moves the effects have been mixed.

“The stronger dollar is hurting exporters, but the flip-side of the exchange rate appreciation is lower import costs, which have in turn helped to ameliorate the impact of rising global commodity prices compared to other countries,” said Williamson.