The ISM Manufacturing Index registered 59.7 points in December, up 1.5 percentage points from the previous month, according to the Institute for Supply Management.
Like the ISM index, a reading above 50 indicates the manufacturing sector is expanding.
In December, the gauge of new orders increased to 69.4, the highest in almost 14 years. The production index also climbed to 65.8 in December from 63.9 in November, indicating a decent acceleration in the pace of growth.
Manufacturers expected to see six months of price increases for some raw materials in the wake of the late summer hurricanes - especially Hurricane Harvey's hit to the key chemical and oil production facilities in Houston.
Of the 18 manufacturing industries, 16 reported growth in December, including machinery, transportation equipment and electrical equipment. "Supplier deliveries continued to slow at a faster rate, and inventories continued to contract at a slower rate during the period". The Customer Inventories Index registered 42 percent in December, which is 3.5 percent lower than November.
Only two industries, wood products and textiles, reported contraction last month.
The latest data brings the average reading in 2017 to 57.6, the highest level in 13 years.
Read the ISM release.
"The improvement was fairly broad based, with the production and supplier deliveries components both rising and the forward-looking new orders index seeing a particularly encouraging leap.Admittedly, the employment index fell back to 57.0, from 59.7, but it is still consistent with manufacturing payrolls continuing to expand at a healthy pace".
"Our belief is that investment spending will be stimulated in 2018 by the cut in corporate taxes and this will be a strong positive for manufacturing", RDQ said in a research note, adding that the jump in new orders "is certainly consistent with this thesis".
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