Manufacturing activity grew at the fastest pace in two years last month as both new orders and production picked up sharply - a signal that the energy sector may be poised to drive a rebound for US factories this year.
An index of factory activity rose to 54.7 from 53.2 in November, the Institute for Supply Management said Tuesday. A reading above 50 means the sector is expanding, while below indicates contraction. Economists expected a smaller increase to 53.7.
The gain marks the fourth straight month that the measure has shown a faster expansion.
Manufacturers have been bolstered by a recovering oil sector, with rising crude prices boosting energy investment, and a dollar that had stabilised until a recent rally, making US goods more affordable abroad. The greenback, however, has strengthened in recent months against a basket of currencies, fueling concerns of renewed troubles for the nation’s factories.
In December, the production index increased to 60.3 from 56. And a measure of new orders, a barometer of future output, jumped from 53 to 60.2, the highest level in two years. What’s more, the gap between new orders and inventory levels reached a three-year high.