WASHINGTON (AP) – US factory activity grew at the slowest pace in six months in December, weakened by declines in orders and production. Yet growth was still healthy, a sign manufacturing may help drive the economy’s expansion in 2015 as it did last year.
The Institute for Supply Management, a trade group of purchasing managers, said Friday that its manufacturing index fell to 55.5 in December from 58.7 in November. Any reading above 50 signals expansion. November’s figure was just below a three-year high reached in October.
December’s reading is the lowest since June. But it is also close to the average for all of 2014 and remains at a solid level. Americans are buying more cars and appliances, boosting demand for factory-made goods. Economists also forecast that businesses may spend more on industrial equipment this year, which would also lift output.
A labour dispute at West Coast seaports, from San Diego to Seattle, has interrupted the shipment of raw materials for many manufacturers, the ISM survey found. That has disrupted production and likely contributed to the lower reading.
Despite the decline, most economists are optimistic about manufacturing’s prospects in 2015.
“These were readings that in any ordinary time would be considered excellent,” Guy Berger, an economist at RBS Securities wrote in a note to clients.
The survey’s measure of employment rose to a four-month high, evidence that factories added jobs last month. That is a good sign for the December jobs report, which will be released next Friday.
US manufacturers are still growing despite struggling economies overseas. A measure of overseas demand for US goods fell last month, the ISM survey found, but remained in expansion territory. Most economists are confident that the US market is large enough to sustain US factory growth this year.