Rebound in US factory output boosts outlook

AMERICAN manufacturing activity jumped to a six-month high in December, after a decline in growth the previous month, it was revealed yesterday.

New orders in the sector hit a seven-month high of 60.9, according to the ISM manufacturing index. The headline index figure reached 57, up from 56.6 in November.

The results bode well for the recovery, with separate data for November showing a 0.4 per cent rise in construction spending in the US.

“Our calculations suggest that fourth quarter GDP growth was as strong as four per cent compared to the previous year,” said Paul Ashworth of Capital Economics. “And growth in the first quarter of 2011 is likely to come in at around the same.”

Factory production also showed a sharp uptick, rising to 60.7 from 55 the previous month.

While the rate of employment growth fell (from 57.5 to 55.7) it remains above the “no change” 50 mark, indicating growth.

“As the index remains well in expansion territory, we don’t expect a deterioration in job growth in the sector as activity continues to pick up,” said Nicholas Tenev of Barclays Capital.