Indicating an unexpected acceleration in the pace of growth in the U.S. manufacturing sector, the Institute for Supply Management released a report on Thursday showing its index of activity in the sector rose to a nearly fourteen-year high in February.
The ISM said its purchasing managers index climbed to 60.8 in February from 59.1 in January, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to edge down to 58.7.
With the unexpected increase, the purchasing managers index reached its highest level since hitting 61.4 in May of 2004.
Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, said the growth in the manufacturing sector was led by continued expansion in new orders, production activity, employment and inventories.
The report showed a notable increase by the employment index, which surged up to 59.7 in February from 54.2 in January.
“Employment expansion remains strong, with panel member companies increasing head count during February to support growth in production activity,” Fiore said.
The new orders index dipped to 64.2 in February from 65.4 in January and the production index fell to 62.0 from 64.5, although both indexes remain at elevated levels.
On the inflation front, the prices index rose to 74.2 in February from 72.7 in January, indicating an increase in raw materials prices for the 24th consecutive month.
“This report supports our predictions that the U.S. economy will expand 3% this year and that headline inflation could hit 3% in the summer,” said ING chief international economist James Knightley.
He added, “With new Fed Chair Jay Powell seemingly backing the case for further policy tightening we look for a March 21st rate hike with three more to follow later this year.”
The ISM is scheduled to release a separate report next Monday on activity in the service sector in the month of February.