Economic activity in the manufacturing sector expanded in December 2017, marking the 103rd consecutive month of economic expansion in the US. The numbers point to a continued brisk pace of expansion, likely inviting multiple Fed policy responses in early 2018.
Here are the numbers:
Source: ISM
These figures make 2017, with its 57.6 average, the best year for manufacturing since 2004. And the New Orders subindex is off the charts! That bodes well for continued upside in the manufacturing sector. And on the back of these numbers, the Atlanta Fed updated its GDPNow tracker to 3.2% for Q4.
But at the same time, the Fed Minutes released today said “that inflation pressures could build unduly. perhaps owing to fiscal stimulus or accommodative financial market conditions.” And given employment 1/2% below the Fed’s long-term target of 4.6%, we are likely to see not just one response from the Fed in early 2018, but multiple hikes by summertime.
Watch the path of inflation and the year-on-year pace of real GDP growth to determine whether the yield curve steepens or flattens on the back of this news.
