American manufacturing expanded in December at the fastest pace in two years, reflecting firmer output and the biggest pickup in orders growth since August 2009.

The Institute for Supply Management announced today that its index increased to 54.7, the fourth straight advance, from 53.2 a month earlier. The median forecast in a Bloomberg survey called for 53.8. Readings above 50 indicate growth. The ISM’s measure of orders surged 7.2 points, while its gauge of prices paid for materials climbed to the highest level since June 2011.

The jump in bookings, including the strongest pace of export orders since May 2014, will help keep factories on solid footing early this year as business confidence improves. Plant managers responded to the brighter outlook by adding to staff at the fastest pace since the middle of 2015, according to the ISM’s report.

Additional hiring and the pickup in inflation at the producer level help explain the Federal Reserve’s decision last month to raise interest rates.

 

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