Factory growth surges in US, euro area

WASHINGTON/FRANKFURT • Factories in the US continued to expand in March at a robust pace, demonstrating momentum in an industry that had struggled for the better part of the last two years, according to data released by Institute for Supply Management (ISM) yesterday.

Its manufacturing purchasing managers' index (PMI) eased to 57.2 from February's 57.7 - the highest since August 2014. Readings above 50 indicate growth.

The index, which has risen in six of the last seven months, underscores factory managers' optimism that has also emerged from Asia to Europe. In the United States, the ISM measure of export orders climbed to the highest level since November 2013, indicating improving global demand.

The recent pick-up has been a bright spot for the US economy during a first quarter otherwise marked by tepid gains in household spending, the biggest part of gross domestic product.

The ISM's indices of inventories continued to contract in March, a sign that production gains will hold up after Federal Reserve factory output data showed the strongest back-to-back advances in almost three years.

Meanwhile, euro area factory growth accelerated in March, as an improving global economy boosted export demand in the region's biggest economies.

IHS Markit said its PMIs for Germany, France and Italy all rose compared with the previous month, helping to push its euro region gauge to 56.2 in March, the highest since 2011, from 55.4 in February. New export business increased in all three nations.

Markit also warned of potential inflationary pressure linked to the euro and rising commodity prices. Output price growth strengthened in March and was close to a six-year high, while suppliers struggled to meet growing demand.

The European Central Bank has acknowledged that the recovery is firming, but its president Mario Draghi maintains that inflation is not yet self-sustaining enough to justify an end to extraordinary monetary support.

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A version of this article appeared in the print edition of The Straits Times on April 04, 2017, with the headline 'Factory growth surges in US, euro area'. Print Edition | Subscribe