US factory growth fastest in 13 years; slowdown in UK manufacturing

US factory index climbed to 60.8, the highest since May 2004, from 58.8. Readings above 50 indicate expansion.
US factory index climbed to 60.8, the highest since May 2004, from 58.8. Readings above 50 indicate expansion. PHOTO: AFP

WASHINGTON • United States manufacturing growth expanded last month at the fastest pace in 13 years, powered by robust order growth and healthy production, figures from the Institute for Supply Management (ISM) showed yesterday.

On the other hand, British manufacturing growth cooled last month, according to IHS Markit's monthly purchasing-manager survey, as cost pressures lurched higher, findings that could put the Bank of England (BOE) a step closer to raising interest rates, despite a murky outlook ahead of Brexit.

US factory index climbed to 60.8, the highest since May 2004, from 58.8. Readings above 50 indicate expansion. The measure of new orders increased to 64.6, the strongest since February, from 60.3, while the employment gauge rose to 60.3, the best reading in more than six years, from 59.9.

The strength of the advances in the ISM's gauges probably includes the recovery and restarting of business following Hurricane Harvey, which had caused many businesses to shut shop.

While increased factory bookings and production reflect a bounce back from the storm, the nation's producers had already been on firmer footing because of improving global demand and an increase in US capital spending.

In the United Kingdom, the key factory index slipped to 55.9 from 56.7 in August, still well above the 50 level that divides expansion from contraction. A measure of input costs jumped and factories are passing on at least some of the increase. Output prices advanced at the fastest pace in four months.

BOE officials are counting down to a meeting in November at which they may announce the first rise in interest rates in more than a decade. There is plenty to assess, with figures last week showing improving confidence and consumer numbers contrasting with continued sluggish growth and a disappointing current-account deficit.

Markit's survey showed that increases in new orders slowed last month, though they remained above the long-run average. While some respondents cited a boost from the weaker pound, it was "less prominent as a factor than earlier in the year".

"On balance, the continued solid progress of manufacturing and export growth is unlikely to offset concerns about a wider economic slowdown," said Mr Rob Dobson, director at IHS Markit.

"But the upward march of price pressures will add to expectations that the BOE may soon decide that the inflation outlook warrants a rate hike," he said.

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A version of this article appeared in the print edition of The Straits Times on October 03, 2017, with the headline 'US factory growth fastest in 13 years; slowdown in UK manufacturing'. Print Edition | Subscribe