A gauge of the US factory sector hit its highest level since August 2014 last month adding to signs of improvement in the economy and bolstering the case for a rate rise by the Federal Reserve later this month.
The Institute for Supply Management’s purchasing manger’s index climbed to 57.7, up 1.7 percentage points from the previous month and topping Wall Street estimates of 56.2. A breakdown of the report showed growth in new orders, production and inventories from January to February but the employment and price sub-indices did register a decline.
Each of the 18 manufacturing industries registered growth last month except furniture and related products.
The data arrive after a the Fed’ preferred inflation measure climbed to within a hair of the central bank’s 2 per cent inflation target.
“Is it possible that if this continues, the Fed is going to hike more than 3 times this year?” said Peter Boockvar at the Lindsey Group. “Probably not but the markets may be the decider on that as all the Fed is doing is being reactive. Proactive behavior is not in their DNA”.
The US manufacturing sector had been hamstrung by strength in the US dollar and a downturn in crude prices. While the overall tone struck by the report was upbeat, respondents in the petroleum and coal industries said: “even though oil and gas prices are on the upswing, we still face a tough 2017 and will continue to save on costs”.