U.S. ISM manufacturing index rises in December, growth likely to continue in manufacturing sector

The U.S. Institute for Supply Management index of manufacturing was up in the month of December. The index rose 1.5 points to 59.7, coming above market expectations of a flat reading. The ISM manufacturing index has been in the expansion territory for the 16th consecutive month.

Looking at the details the report looks generally positive. All major indices recorded rises except the employment index that slipped to 57 from 59.7. The prices paid index also recovered to 69 after dropping in November to 65.5. The spread between new orders and inventories broadened further in December to 20.9, implying that the manufacturing is expected to hold onto recent gains in the months ahead.

The manufacturing index regained its peak of October, implying robust growth in the manufacturing sector to end 2017, noted TD Economics in a research report. Momentum is solid heading into the New Year, and with tax stimulus stimulating bottom lines and underpinning demand, growth is expected to carry on.

All signs indicate towards the U.S. economy continuing to run above its cruising speed, which should eat up any remaining economic slack and set the stage for higher inflation. As the jobless rate drops to new lows, it would be the main indicator to watch for the rate of hikes from the U.S. Fed, added TD Economics.

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