U.S. Factory Activity Accelerated to Fastest Pace in More Than Two Years -- 3rd Update
February 01 2017 - 3:37PM
Dow Jones News
By Jeffrey Sparshott
U.S. manufacturing activity rose to the highest level in more
than two years in January amid rising demand and expectations for a
friendlier business environment during the Trump
administration.
The Institute for Supply Management on Wednesday said its
purchasing managers index rose to 56.0 in January from 54.5 in
December, the highest since November 2014. A reading over 50
indicates expansion in the sector; below 50 suggests
contraction.
The closely watched gauge has now climbed for five straight
months, partly reflecting stabilization of the dollar and oil
prices, alongside some improvement demand at home and abroad.
November's election of Donald Trump -- and his promises of lower
taxes, fewer regulations, more infrastructure spending and a focus
on domestic production -- also appears to have raised corporate
expectations.
"I think they've come out with guns blazing and following up on
the some of their campaign promises," Mark Millett, president and
chief executive of Steel Dynamics Inc. , told investors last week.
"And I think tax reform...and sensible regulation will certainly
help the country have a more positive business climate and boost
the economy."
The U.S. steel industry had been battered by low commodity
prices, which damped demand for heavy equipment, and a flood of
imports.
The Fort Wayne, Ind.-based steelmaker and metals recycler said
the outlook has brightened. Mr. Millett anticipates steady demand
from the auto sector, a strong improvement in the energy sector and
pickup in construction from government infrastructure spending.
More broadly, 12 of the 18 industries in Wednesday's reported
growth in January.
Underlying details also were upbeat. The ISM new-orders index
inched up to 60.4 in January from 60.3 the prior month, and the
production index was 61.4 last month, up from 59.4 in December.
Both have gained for five straight months.
The employment index increased to 56.1 compared with 52.8 a
month earlier and is now up for four consecutive months.
"It's a continuation of the momentum that was built in the
latter part of last year and hopes and expectations for the new
economy, the new administration, which is settling into starting
its work," said Bradley Holcomb, who oversees the survey.
Raw material prices are also up for 11 straight months, a
development that could suggesting rising inflation pressures. The
subindex registered 69 in January, an increase from 65.5.
The overall ISM gauge signaled contraction in late 2015 and
early 2016 as manufacturers were squeezed by the energy sector's
slump and a strong dollar, which curtailed foreign demand for
U.S.-made products.
Other measures of manufacturing, meanwhile, have been mixed.
Demand for long-lasting goods stabilized toward the end of the
year, according to separate Commerce Department data. A Federal
Reserve report on industrial output showed that factory activity
ended 2016 little changed from the beginning of the year.
"We suspect some of the current strength [in ISM] reflects a
temporary postelection rise in confidence rather than any
significant change yet in underlying trends," said Jim O'Sullivan,
chief U.S. economist at High Frequency Economics.
Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com
(END) Dow Jones Newswires
February 01, 2017 15:22 ET (20:22 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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