U.S. Business Investment Fuels Factory-Sector Momentum

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U.S. factories maintained momentum in January, buoyed by rising demand for equipment, in the latest sign companies are stepping up investment spending.

The Institute for Supply Management on Thursday said its index of factory activity settled at 59.1, down slightly from 59.3 in December but still ranking as the third-highest since 2011. Any mark above 50 indicates expanding activity, as measured by factors like product sales, raw-materials prices and industry employment.

One factor driving the latest growth: Higher demand for business equipment. Sales of such long-lasting goods indicates companies are investing to expand their production capacity. The lead time for filling those orders rose 8% over the month because factories are being flooded with new orders, said

Tim Fiore,

head of the ISM survey.

”We’re still accelerating,” Mr. Fiore said of the overall manufacturing outlook. “There are a lot of strong feelings 2018 is going to be a good year.”

A measure of overall sales of goods, known as new orders, slipped from December but remained a robust 65.4. Production also held at a high level. Employment continued to grow, but more slowly.

Prices for raw materials hit the highest level since 2011, indicating higher inflation pressures. Mr. Fiore said that is a sign of healthy demand rather than an overheating economy.

The factory sector has expanded for most of this decade, due largely to steady but slow economic growth in the U.S. Now, the sector appears to be picking up above recent trends, largely due to firming global growth and higher spending by businesses, who had spent years hunkering down.

“Healthy demand for U.S. manufactured goods should persist especially as savings from tax cuts is spent, and as long as healthy global demand persists,”

Fotios Raptis,

senior economist at TD Economics, said in a note to clients.

Write to Josh Mitchell at

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