Growing global demand has fuelled a surge in US manufacturing activity, which last month accelerated at its fastest rate in almost seven years, according to the Institute of Supply Management.
ISM’s manufacturing index rose from 60.8 per cent to 61.4 per cent in February, beating economists’ expectations and reaching its highest level since May 2004. Readings greater than 50 signal expansion.
Norbert Ore, ISM chairman, said strong exports from the US were driving production and new orders, which grew significantly faster than inventories. Hiring in the manufacturing sector was also strong, breaching the 60 per cent mark for only the third time in the past 10 years.
“Growth in the manufacturing sector was responsible for maintaining payroll growth last month,” said David Semmens, US economist at Standard Chartered Bank. “With business inventories and customer inventories still leaving room for further additions despite very strong production we remain encouraged that the manufacturing sector’s revival will persist.”
In spite of the improvement, manufacturing executives said that they were seeing “significant inflation” of raw materials and that the weak US dollar was increasing the costs of components purchased overseas.
Mr Ore said that industries with exposure to the housing market were continuing to struggle and that rising raw material costs are a concern.
Underlining the troubles facing the real estate market, a separate commerce department report showed US construction spending falling by 0.7 per cent to $791.8bn in January.
That decline left investment down by almost 6 per cent from a year ago and was the result of a drop in spending on private commercial projects, which fell at the fastest rate since 2004.