World Economy
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US Factory Sector Chills

US Factory Sector ChillsUS Factory Sector Chills

The US factory sector grew at its slowest pace in six months in December, a sign that weakness in the global economy is weighing on the United States. The Institute for Supply Management (ISM) said its index of national factory activity fell to 55.5 last month from 58.7 in November.

A reading above 50 indicates expansion in the manufacturing sector, and the reading remains well above its two-year average. That means the slowdown appears unlikely to derail a broader strengthening of the US economy.

“These were readings that in any ordinary time would be considered excellent,” Guy Berger, an analyst with RBS Securities, said in a note to clients.

Prices for US Treasuries rose and the US dollar was up against a basket of currencies after the data. US stock indexes also were trading higher.

Still, the data suggests weakness abroad and a surge in the value of the dollar, which is near its strongest level since 2005, are inflicting pain on key parts of the US economy. A gauge of factory exports fell to 52 in December from 55 in the previous month.

At the same time, the weakness in global demand also has pushed oil prices lower, enabling American consumers to spend more and boost the US economy.

The economy went on a tear in the third quarter, when it grew at a 5 percent annual rate, and many economists expect a generally strong showing in the second half of 2014 will continue into this year, leading the US Federal Reserve to raise interest rates sometime in 2015.

 

Financialtribune.com