Manufacturing Activity Rises for Second Consecutive Month

The Institute for Supply Management, a trade group of supply management professionals, said Friday that its index of manufacturing activity jumped to 53.1 in January from 50.2 in December. It was the highest reading since April, when the index hit 54.1.

Any reading above 50 indicates expansion.

In another positive economic report, the Commerce Department said spending on construction projects rose in December, ending a year in which construction activity increased for the first time in six years.

The second straight monthly increase in the manufacturing index showed that activity was starting to grow again after struggling through most of 2012. Uncertainty about tax increases and deep government spending cuts led many companies to reduce orders for machinery and equipment earlier this year. And a weaker global economy dampened demand for American exports.

The report was also encouraging because it showed that demand for factory goods increased while consumers started to pay higher Social Security taxes. That left them with less take-home pay, which could hurt consumer spending.

The survey came hours after the Labor Department reported that employers added 157,000 jobs in January. Manufacturers added 4,000 jobs last month, the fourth straight monthly increase.

“There’s a fair bit of optimism here to start the year,” said Dan Greenhaus, chief global strategist at BTIG LLC, a trading firm based in New York.

Mr. Greenhaus said the solid manufacturing gains, especially in new orders and employment, suggested that “the larger story remains intact, of a moderate, ongoing recovery.”

The I.S.M. report showed that 13 of the 18 industries surveyed had an increase in activity last month. They included manufacturers of plastics and rubber, textiles, furniture, printing, and apparel. Four industries reported contraction: minerals, computers and electronics, wood and chemicals.

The survey’s new orders index returned to growth, rising to 53.3 in January from 49.7 in December. Companies reported adding to their inventories in January after two months of declines, a sign that factories are preparing to increase production.

Slower growth in stockpiles was a major reason the economy shrank at an annual rate of 0.1 percent in the quarter from October to December, the first contraction in three and a half years.

Construction spending rose to a seasonally adjusted annual rate of $885 billion in December, up 0.9 percent from November when spending increased a revised 0.1 percent. For all of 2012, construction spending totaled $850.2 billion, a gain of 9.2 percent from 2011, when construction spending had fallen 3.3 percent. Even with the increase, construction activity is 27.2 percent below its high of $1.17 trillion in 2006 at the peak of the housing boom.

Construction has been posting a slow recovery, led by housing gains. In December, housing and nonresidential construction posted gains but spending on government projects fell.

Article source: http://www.nytimes.com/2013/02/02/business/economy/manufacturing-activity-rises-for-second-consecutive-month.html?partner=rss&emc=rss