US industry and shoppers upbeat

Faster-than-expected growth in the manufacturing sector and a surge in consumer confidence in June are boosting hopes of US economic strength.

The Institute for Supply Management's (ISM) manufacturing index surged to 53.8% in June, thanks to rising orders.

Analysts had forecast 51.5% - a figure above 50% indicates growth.

Meanwhile, the University of Michigan's consumer confidence index rose to 96 - better than the expected 94.6, and up from a reading of 94.8 in May.

Shopping boost

The news follows a similarly-bullish report from the Conference Board, which said improved employment prospects had led to a second strong monthly rise in consumer confidence.
The manufacturing sector may be managing well the headwinds stemming from high energy prices
Alex Beuzelin, Ruesch International


Retail spending makes up two-thirds of the US economy, so consumer confidence is an important barometer of economic growth prospects.

Experts suggested a mid-May dip in oil prices may also have helped, as it would have eased fuel prices for motorists.

Manufacturing relief

Despite a slight slowdown over the past six months, the manufacturing sector has now racked up 25 months of growth, according to ISM figures - something the survey's chief Norbert Ore dubbed an "encouraging trend".

"The improved rate of growth in new orders is quite encouraging, particularly when combined with a slower rate at which prices are escalating," he added.

However, Mr Ore did warn that the stronger dollar and higher oil prices remained a concern, despite the fact that the figures indicate a slowing rise in the price of raw materials.

"The ISM came out higher than forecast, so that provides some encouraging news that the manufacturing sector may be managing well the headwinds stemming from high energy prices," said Alex Beuzelin, forex market analyst at Ruesch International.

He added that the figures were unlikely to change the Fed's current stance on interest rates.

The Fed has been increasing rates at a "measured pace" of a 0.25% rise each month as it tries to maintain economic growth while keeping a lid on inflation.