Business activity in the United States manufacturing sector increased in December, reversing contraction in November and helping the sector recover from a three-year low.
The latest gains indicate manufacturers ended the year with relatively strong performance and are starting 2013 on a positive note, despite earlier pressure from the fiscal cliff.
According to the Institute for Supply Management’s (ISM) latest manufacturing Report on Business, U.S. manufacturing made gains in several key categories last month, particularly exports and employment, which enabled it to post overall growth in December. The U.S. economy grew for the 43rd consecutive month in December.
The ISM purchasing managers’ index (PMI), a key monthly gauge of the factory sector, rose to 50.7 last month, up from 49.5 in November and marking the third time manufacturing has grown in the last seven months. Readings above 50 indicate overall expansion for the sector, meaning that manufacturing activity has reversed its decline and resumed growth. However, December’s PMI figure remained below the 12-month average of 51.7.
“The growth in U.S. manufacturing came in the face of fears late last year over the ‘fiscal cliff’ of tax hikes and spending cuts, which would have kicked in at the start of 2013, risking a new U.S. recession. Lawmakers struck a deal late on Tuesday, avoiding income tax hikes for most Americans and delaying the spending cuts for two months,” Reuters reports. “The deal is in line with what many financial firms on Wall Street and around the world have been expecting, suggesting forecasts for economic growth of around 1.9 percent for 2013 would likely hold.”
The December reading slightly exceeded expectations for growth, as economists polled by MarketWatch had forecast the PMI to rise to 50.5 for the month.
Demand for manufactured products held steady in December, with ISM’s new orders index remaining unchanged at 50.3, indicating that orders are continuing to increase at the same pace. December also marked the fourth consecutive month of growing demand.
Manufacturing employment experienced a strong boost last month, with ISM’s employment index rising to 52.7 from 48.4 in November and marking the highest level since September. The increase suggests that manufacturers have resumed hiring at a modest pace.