US manufacturing sector rebounds amid lower trade tensions
The US manufacturing sector rebounded in January after shrinking for five straight months, survey data showed today, in a sign that the country’s factories are set for a better year than they had in 2019.
The Institute for Supply Management’s (ISM) factory gauge rose to 50.9 last month, its highest point since July, up from 47.8 in December. A score of above 50 indicates contraction.
It was the first ISM factory survey to come out since the US and China signed a “phase one” trade agreement that reduced tensions between the world’s two biggest economies.
Under the terms of the deal, China will purchase at least $200bn (£154bn) more of US goods over the next two years. The text of the agreement says it will buy $78bn more in manufacturing products over the 2017 level and $32bn more in farm goods.
Andrew Hunter, senior US economist at consultancy Capital Economics, said the data “echoes the message from the other surveys that the prospects for factory sector activity are starting to improve, while adding to the broader evidence that the economy is turning a corner”.
The jump in the ISM index was driven by a rise in new orders and increased production.
Christoph Balz, economist at Commerzbank, said US manufacturing is “benefiting from a global stabilisation of this sector”.
“Central banks have cut interest rates significantly in 2019 also in the emerging markets, which are similar in size to the US economy. This also supports demand there.”