Manufacturing growth shows surprising gain
An unexpectedly strong report on manufacturing activity Monday bolstered confidence that the nation’s factories will help sustain a recovery.
The report by a private trade group signals that industrial production is likely to keep expanding in coming months, economists said. That could lead, in turn, to increased hiring and job creation.
The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index read 55.9 in December after 53.6 in November. A reading above 50 indicates growth.
It was the fifth straight month of expansion and the highest reading since April 2006. Analysts polled by Thomson Reuters had expected a reading of 54.3.
The ISM said its index of new orders, a signal of future production, jumped last month to 65.5 from 60.3 in November, the highest level in five years. That indicates the overall index should keep climbing and could near 60 in coming months, economists said.
"Overall, this was a very strong report," Millan Mulraine, an economist at TD Securities, wrote in a note to clients business cards.
The ISM’s employment index rose last month to 52 from 50.8, the third straight month it has topped 50.
"When orders are increasing and inventories are going down, that could push up one major weak spot: employment," said Tim Quinlan, an economic analyst at Wells Fargo Securities
A separate report on construction spending sounded a more cautionary note.
Construction activity fell in November for a seventh straight month as spending on both residential and commercial projects declined. The 0.6 percent drop was bigger than the 0.4 percent decline that economists had been expecting.
Increased spending on federal construction projects, fueled by stimulus spending, was largely canceled out by lower state and local construction spending.
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