US production growth booms as manufacturing expands at fastest rate since 2014

 
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Production growth is booming as inflationary pressure grows (Source: Getty)

The US manufacturing sector grew faster than expected in January to expand at the fastest rate since the end of 2014, according to a widely followed indicator of economic health.

The purchasing managers’ index (PMI) for America’s manufacturers reached 56 per cent, according to the Institute of Supply Management (ISM), up from 54.5 per cent in December.

The two-year high in expansion was driven by strong growth in production, while employment reflected other measures of the labour market to rise by 3.3 percentage points.

Read more: Trump bump: US manufacturing activity expands at fastest rate since 2014

Andrew Hunter, an economist at Capital Economics, said the reading “confirms that the manufacturing recovery has continued into the New Year, and also suggests that GDP growth is set to accelerate in the first quarter.”

A similar measure compiled by IHS Markit confirmed the strength of production growth, while confidence in the year ahead rose to its highest since March as managers look to US President Donald Trump to boost the economy, and the manufacturing sector in particular.

Trump has placed reinvigorating US manufacturing jobs, with a “bold plan to create 25 million new American jobs in the next decade”, according to the White House website.

Read more: UK's manufacturers are quick off the blocks as Eurozone sees five-year high

Trump’s pledge to “bring good-paying jobs to our shores and support American manufacturing, the backbone of our economy” is widely credited as a strong vote-winner in former industrial heartlands with high unemployment such as Michigan.

Meanwhile prices continued their upward march, with a reading of 69 per cent representing a 3.5 per cent month-on-month increase.

Inflation has picked up significantly in the US economy in a trend which is set to continue under the stimulative policies of Trump.

Manufacturers saw prices increase by an annual rate 1.6 per cent in December, while the headline inflation rate broke the Federal Reserve’s two per cent target in December.

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