US manufacturing grows at fastest pace since June

In this Feb. 13, 2012 photo, a work­man welds a stain­less steel tank at JV North­west, in Camby, Ore. JV North­west man­u­fac­tures stain­less steel ves­sels. U.S. fac­to­ries stepped up hir­ing and pro­duc­tion in March, the lat­est evi­dence that man­u­fac­tur­ing is grow­ing at a healthy pace and fuel­ing the recov­ery. (Asso­ci­ated Press File | Rick Bowmer)

CHRISTOPHER S. RUGABER

AP Eco­nom­ics Writer

WASHINGTON — U.S. man­u­fac­tur­ing grew last month at the fastest pace in 10 months. New orders, pro­duc­tion and a mea­sure of hir­ing all rose.

The strength at U.S. fac­to­ries sug­gests the econ­omy is health­ier than recent data had indi­cated. That’s a hope­ful sign ahead of Friday’s report on hir­ing in April.

The Insti­tute for Sup­ply Man­age­ment, a trade group of pur­chas­ing man­agers, said Tues­day that its index of man­u­fac­tur­ing activ­ity reached 54.8 in April. That’s the high­est level since June and up from 53.4 the pre­vi­ous month. Read­ings above 50 indi­cate expansion.

The report, which exceeded ana­lysts’ expec­ta­tions, led investors to shift money out of bonds and into stocks. The flurry of stock buy­ing put the Dow Jones indus­trial aver­age on track for its high­est close in more than four years.

The man­u­fac­tur­ing index for April is closely watched in part because it’s the first major eco­nomic report for the month. The big gain fol­lowed a series of weaker data in recent weeks that had pointed to slower hir­ing, increased appli­ca­tions for unem­ploy­ment ben­e­fits and lower fac­tory output.

“This sur­vey will ease con­cerns that the softer tone of the incom­ing news in recent months marked the start of a renewed slow­down in growth,” Paul Dales, an econ­o­mist at Cap­i­tal Eco­nom­ics, said in a note to clients. “We think the lat­est recov­ery is made of sterner stuff, although we doubt it will set the world alight.”

A mea­sure of employ­ment in the ISM’s sur­vey rose to a 10-month high. This showed that fac­to­ries are still hir­ing at a solid pace.

A gauge of new orders jumped to its high­est level in a year. That could sig­nal faster pro­duc­tion in the com­ing months. Export orders also rose, which could off­set wor­ries that weaker economies in Europe and China could drag on U.S. exports.

A sep­a­rate report showed that con­struc­tion spend­ing eked out a gain in March after declin­ing the two pre­vi­ous months. The Com­merce Depart­ment said con­struc­tion spend­ing edged up 0.1 percent.

Spend­ing on single-family home con­struc­tion rose, as did com­mer­cial projects. Those gains off­set steep cut­backs in state and local gov­ern­ment build­ing. Even so, econ­o­mists noted that the pace of pri­vate con­struc­tion in recent months remains weak.

Fac­to­ries have been a key source of hir­ing and growth since the reces­sion ended nearly three years ago. The sec­tor has expanded for 33 straight months, accord­ing to the ISM’s index.

Fac­to­ries account for only about 9 per­cent of total pay­rolls but added 13 per­cent of the new jobs last year. Man­u­fac­tur­ers have added 120,000 jobs in the past three months, about one-fifth of all net gains.

Pre­vi­ous reports on man­u­fac­tur­ing have been neg­a­tive. Fac­tory out­put fell in March, the Fed­eral Reserve said last week. Com­pa­nies made fewer elec­tronic prod­ucts and cut back on steel and other met­als. That decline came after three months of strong gains. But econ­o­mists said the slight down­turn wasn’t enough to sug­gest a major slowdown.

Still, con­sumers cut back last month on pur­chases of big-ticket items such as auto­mo­biles and appli­ances. And while the job mar­ket is improv­ing, incomes are barely grow­ing. That could weigh on con­sumer spend­ing in the com­ing months.

Busi­ness invest­ment is also slow­ing. Com­pa­nies increased their spend­ing on equip­ment and soft­ware at the slow­est pace in nearly three years in the January-March quar­ter, the gov­ern­ment said last week.

Econ­o­mists nev­er­the­less expect most of the chal­lenges to be tem­po­rary. Com­pa­nies may be order­ing less heavy equip­ment because an invest­ment tax credit expired at the start of the year. Orders are likely to rebound later this year, econ­o­mists say.

Posted by AP News on May 1 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.