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US Manufacturing Growth Hits Strongest Pace Since March 2015, Signaling 2018 Optimism

11:50 AM, Jan 2, 2018 — Manufacturing growth in the US was at the strongest pace last month since March 2015, with output and new orders on the upswing, bringing a gain in factory hiring and optimism for the new year.

The seasonally adjusted IHS Markit final Manufacturing Purchasing Managers’ Index rose to 55.1 in December from 53.9 in November. The consensus among analysts on Econoday was 55.

Manufacturers’ output grew at an 11-month high amid stronger demand, and employment rose at the fastest pace since September 2014, the IHS Markit release showed on Tuesday. Costs went up and the rate of cost inflation was “sharp overall” amid supply chain delays and increased global demand for inputs.

“With business optimism about the year ahead running at its highest for two years in the closing months of 2017, companies are clearly expecting to be busier in 2018,” said Chris Williamson, chief business economist at IHS Markit. “Indicators of backlogs of work and input buying likewise suggest production will continue to grow at a solid pace as we move into 2018.”

Williamson said strengthening growth, a solid jobs market and rising prices “will add to expectations that the Fed will remain on track for another rate hike in the near future, with March looking a likely possibility.”

The Federal Reserve raised interest rates three times last year. While the broad expectation on the CME Group’s FedWatch tool is for a rate hold later this month, there’s a 56% probability of a 25 basis-point hike in March.

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