United States manufacturing expanded in December at the fastest pace in three months, as gains in orders and production capped the strongest year for factories since 2004, the Institute for Supply Management said on Wednesday.
The ISM's headline manufacturing index rose to 59.7 from 58.2 in November, beating expectations for a drop to 58.1.
ISM's Production Index increased to 65.8% from 63.9% in November. The employment index dropped to 57.0 in December from 59.7 in November, although the reading above 50 indicates the fifteenth consecutive month of job growth in the manufacturing sector. The one disappointment was the employment index, which fell almost three points to a still-strong 57 per cent. In responding to ISM's survey, 65 percent stated that they had difficulty hiring new employees and 44 percent increased starting pay in an effort to attract new workers.
Of the 18 manufacturing industries, 16 reported growth in December, including machinery, transportation equipment and electrical equipment.
"The upbeat mood is underscored by an increased appetite to hire new staff, with the survey indicating that factory payroll numbers are rising at a rate not seen for over three years".
Eleven industries reported expansion, while two reported a decrease in employment. The 2017 average was 57.6 and was made possible through strong domestic business investment and increased household spending, despite a dip in November following a number of devastating hurricanes. The index has been above 50% for 16 consecutive months and above 60% for seven.
New orders jumped in December to the highest level since January 2004. While most would embrace the challenge of having too much to do, manufacturing output is struggling to keep pace with the demands of these new orders and creating lower inventory levels at the raw material, component and finished product sections of the supply chain.
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