A report from the Institute for Supply Management (ISM) showed on Tuesday the U.S. manufacturing sector’s activity expanded in December at a faster pace than in November.

The ISM's index of manufacturing activity came in at 60.7 percent last month, up 3.2 percentage points from the November reading of 57.5 percent. The December reading pointed to the seventh straight month of expansion in factory activity and the highest growth rate since August of 2018.

Economists' had forecast the indicator to decline to 56.6 percent.

A reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction.

According to the report, the New Orders Index stood at 67.9 percent, up 2.8 percentage points from the November reading, while the Production Index registered 64.8 percent, an advance of 4.0 percentage points compared to the November reading, the Supplier Deliveries Index recorded 67.6 percent, up 5.9 percentage points from the November figure and the Employment Index was at 51.5 percent, 3.1 percentage points higher from the November reading, returning to expansion territory.

Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted that the manufacturing economy continued its recovery in December. “Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories, but absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that are limiting manufacturing growth potential,” he added. “However, panel sentiment remains optimistic (three positive comments for every cautious comment), an improvement compared to November”. He also said that the past relationship between the PMI and the overall economy indicated that the PMI for December (60.7 percent) corresponds to a 5.2-percent increase in real gross domestic product (GDP) on an annualized basis.