US manufacturing sector sees acceleration

WASHINGTON: The US manufacturing sector posted its strongest pace of activity since April 2006 last month as factories ramped up production to make up for a massive drawdown in inventories, a survey showed Monday.

The Institute for Supply Management said its manufacturing index, also known as the purchasing managers index, climbed to 55.9 percent in December from 53.6 percent in November, for a fifth consecutive month of expansion.

The figure was stronger than the consensus estimate of a modest rise to 54.3 percent. Any number above 50 percent indicates growth.

"The sector may be benefiting from an excessive destocking cycle," said Norbert Ore, chair of the ISM survey committee.

"Inventories have been 'too low' for nine consecutive months, and this month's index is the lowest reading since the inception of the index in January 1997. Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn."

The ISM report showed nine industry sectors growing, including transportation, computers, apparel and foods. Seven sectors contracted including wood, plastics and chemicals.

In the survey's sub-indexes, new orders rose more that five percentage points to 65.5 percent and production increased nearly two points to 61.8 percent.

The employment sub-index meanwhile increased to 52 percent from 50.8 percent, suggesting the manufacturing sector is adding workers at a faster pace.

"Overall, the December survey points toward sturdy growth in manufacturing industrial production, which is forecast to have increased 1.2 percent at an annual rate in the fourth quarter," said Ryan Sweet at Moody's Economy.com.

Ian Shepherdson at High Frequency Economics said the ISM index "was propelled by a rebound in the new orders index, which tends to lead the other components and therefore suggests the January headline index will rise further."

He added: "We remain of the view that this survey overstates the pace of broad economic growth because of its large company, manufacturing bias, but overall no doubt this is a robust report."