US manufacturing index reaches its highest level in nine months in December

Washington. The US manufacturing sector moved closer to recovery in December with a rebound in production and a further increase in orders, although factories were faced with higher input prices towards the end of the year.

The Institute for Supply Management (ISM) said yesterday that its manufacturing PMI rose from 48.4 in November to 49.3 last month, the highest reading since March.

A PMI reading below 50 indicates contraction in the manufacturing sector, which represents 10.3 percent of the world’s largest economy and whose activity is the most closely related to the Mexican economy.

December was the ninth consecutive month in which the PMI remained below the 50 threshold.

The manufacturing sector was hit by the Federal Reserve’s aggressive tightening of monetary policy in 2022 and 2023 to contain inflation. But trusted surveys, including the PMI, differ on official factory production figures.

Government data last month showed the manufacturing sector grew at an annual rate of 3.2 percent in the third quarter and contributed to the economy’s 3.1 percent pace of expansion during that period.

The US central bank is cutting interest rates, and last month lowered its benchmark overnight rate by a quarter of a point (0.25 points) to the range between 4.25 and 4.50 percent. It was the third straight cut since the Fed began its easing cycle in September. The Fed’s official interest rate was raised by 5.25 percentage points in 2022 and 2023.

Incoming President Donald Trump’s promise to cut taxes could give a boost to the manufacturing industry. But other promises, such as raising tariffs on imported goods, could raise commodity prices.

The ISM survey’s future new orders subindex rose to 52.5 from 50.4 in November, marking the first expansion since March. Factory production rebounded after contracting for months.