Factory activity in the United States is near 14-year peak; home sales increase in December


In this news, we discuss the Factory activity in the United States is near 14-year peak; home sales increase in December


WASHINGTON (Reuters) – U.S. manufacturing activity hit its highest level in nearly 14 years in early January, but supply chain bottlenecks caused by the COVID-19 pandemic are pushing up prices and signaling a rising inflation in the coming months.

Other data from Friday showed an unexpected increase in sales of previously owned homes in December. Manufacturing and the housing market are helping to anchor the economy, which is battered by a wave of coronavirus infections. But pandemic is causing labor shortages in construction sites and factories, which could undermine some of the strength of the manufacturing and housing sectors.

Data firm IHS Markit said its flash manufacturing PMI in the United States accelerated to 59.1 in the first half of this month, the highest since May 2007, from 57.1 in December.

Economists had forecast the index to drop to 56.5 in early January. A reading above 50 indicates growth in the manufacturing sector, which accounts for 11.9% of the US economy. Manufacturing is supported by companies restocking and a shift in demand towards goods from services due to the pandemic.

The IHS Markit survey measure of new orders received by factories reached its highest level since September 2014. The surge in demand reflected both existing and new customers, “some customers have reportedly committed to previously suspended orders ”. This led to manufacturers hiring more workers earlier this month. The index of employment in factories surveyed rose to 54.8 from 52.2 in December.

But the pandemic is erasing the supply chain, causing manufacturers to pay more for materials and pass higher production costs on to consumers. The survey’s gauge of prices received by factories reached its highest level since July 2008.

This mirrored other surveys of the manufacturing sector, suggesting that inflation could accelerate and remain elevated beyond the expected push from the low readings in March and April of the calculation.

The strength of manufacturing has helped boost business activity. The survey’s composite flash PMI production index, which tracks the manufacturing and service sectors, rose to 58.0 earlier this month, from 55.3 in December. As its flash services sector PMI rose to 57.5 from 54.8 in December, the pace of new business growth eased in early 2021.

The service sector, which accounts for more than two-thirds of U.S. economic activity, has suffered the brunt of the pandemic, with severe disruption to restaurants, bars and other businesses drawing crowds. COVID-19 has infected more than 24 million people in the United States, with a death toll of over 400,000.

The survey’s service sector employment measure fell to a six-month low in early January.

US stocks traded lower as the dollar remained stable against a basket of currencies. US Treasury prices have gone up.


In a separate report on Friday, the National Association of Realtors said sales of existing homes rose 0.7% to a seasonally adjusted annual rate of 6.76 million units last month. Economists had forecast that sales would decline 2.0% to a rate of 6.55 million units in December.

Home resales, which account for the bulk of home sales in the United States, jumped 22.2% on an annual basis. They totaled 5.64 million in 2020, the highest number since 2006. Sales in December increased in the Northeast and the South. They remained unchanged in the Midwest and declined in the West.

Cheaper mortgages and an exodus from city centers to suburbs and other low density areas, as businesses allow employees to work from home and schools switch to online classes due to COVID-19, under – increase the demand for housing. About 23.7% of the working population works from home. The pandemic has had a disproportionate impact on low wages.

But housing supply remains a challenge. While the government reported Thursday that homebuilding and building permits surged in December to levels last seen in 2006, builders are complaining about rising lumber prices and persistent labor shortages. -work and land, and they said that “the delayed delivery times had put upward pressure on house prices. . “

In December, there was a record 1.07 million previously owned homes on the market, down 16.4% from November and 23% from a year ago, leading to an acceleration in l house price inflation. The median price of existing homes jumped 12.9% from a year ago to reach $ 309,800 in December. House prices rose 9% in 2020.

At the pace of December sales, it would take a record low of 1.9 months to deplete current inventory, compared to 2.3 months in November and 3.0 months a year ago. A six to seven month supply is seen as a healthy balance between supply and demand.

Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Paul Simao

Original © Thomson Reuters

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