The ISM's Factory Index in U.S. Exceeds Expectations on Higher Prices Paid
Manufacturing production in the United States gained at its fastest pace since May 2004, rising to 60.8 in January versus a prerelease median survey figure of 58.0. The index is up from December’s 58.0 gauge. The index, which signals growth with a reading above 50, surged to its fastest pace in nearly seven years as orders rose to a seven-year high, and the main component representing factory employment gained to its highest level since 1973. However, the largest gain within the index came from the prices paid component, a measure of prices paid at the gate by producers. An increase in the prices paid component suggests that inflationary pressures may be reaching a boiling point after which producers will be forced to pass on some of the additional costs of production to consumers.
Until then, the expansion of manufacturing production is expected to continue in the first few months of 2011 as consumer spending steadily increased in the latter half of 2010. The rebound in manufacturing production in the United States is parallel to rejuvenations in the sector elsewhere in the world, such as Europe and China, which have showed upbeat manufacturing data early in the new year as well.
Written by Christopher Vecchio, DailyFX Research
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