US manufacturing sector grows at slowest pace since June

The factory activity in the United States grew at the slowest pace in the past six months in December as it was weakened by significant drops in productions as well as orders. Despite this the growth remained healthy, signaling improving manufacturing sector may help in accelerating the expansion process of the country’s economy in the New Year too as it did in 2014.

The Institute for Supply Management on Friday said that its manufacturing index declined to 55.5 in the month of December from November’s 58.7, which was just below a three-year high that was reached in October.

Institute for Supply Management is a trade group of purchasing managers. Notably, any reading above 50 signal towards expansion in the sector.

The reading recorded in December is the lowest since June last year. However, it is also close to the average for the overall year and continues to remain at a solid level.

According to the analysts, the demand for more cars and appliances are rising among the Americans and this is boosting demand for factory-made goods. On the other hand, the economists also made forecast of more spending on industrial equipment by the businesses this year. They believe this would also lift output.

A labor dispute at West Coast seaports, between San Diego and Seattle, has also obstructed the raw materials’ shipment for many manufacturers, according to the ISM survey. Analysts believe that this has also interrupted production and has probably contributed to the lower reading.

Undeterred by the decline, most of the economists are optimistic about the prospects of the country’s manufacturing sector in 2015.

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

Another economist Paul Dales, from Capital Economics, said, “The strength of domestic demand will ensure that industry and the wider economy still perform particularly well in 2015.”

Meanwhile, the US manufacturers were found growing despite the struggling economies in the global context.