US manufacturing was stronger than expected in November, although the strong dollar remains a headache for producers in the sector.
The Institute of Supply Management and Markit Economics released their monthly reports on US manufacturing on Thursday.
The ISM purchasing manager’s index (PMI) rose to 53.2 in November (52.5 expected.) Regional data received over the past month suggested improvement in the sector and had pointed to a strong national reading.
ISM’s report showed that manufacturing production and new orders improved in November, while employment slipped. Business inventories remained in contractionary territory, with a sub-index reading of 49 – below the 50 threshold of expansion.
US manufacturers are slowly picking themselves out of a rut that was triggered, in part, by the dollar’s rapid rise in 2014. The dollar rose as investors bet that higher interest rates and inflation were coming. They turned super bullish again in November after Donald Trump was elected, sending the dollar to the highest level since 2003. A stronger dollar makes it more expensive for people outside the US to buy American products.
“The stronger dollar is hurting exporters, but the flip-side of the exchange rate appreciation is lower import costs, which have in turn helped to ameliorate the impact of rising global commodity prices compared to other countries,” said Chris Williamson, Markit’s chief business economist.
Markit reported its index at 54.1, up from 53.9 in its flash reading. Manufacturing output rose at the fastest pace in 20 months. Many contacts told Markit that clients were more willing to spend with the uncertainty over the election over.
“Both production and order books are growing at impressive rates, fueled predominantly by rising domestic demand for goods from both consumers and businesses,” Williamson said.