Manufacturing in U.S. grew at fastest pace in seven months

WASHINGTON – Manufacturing in the U.S. grew in January at the fastest pace in seven months, a sign the industry will lead the U.S. expansion early this year.
The Institute for Supply Management’s manufacturing index climbed to 54.1, less than projected, from 53.1 in December, the Tempe, Ariz.-based group’s report showed Wednesday. Figures greater than 50 signal expansion. The median forecast of economists surveyed by Bloomberg News was 54.5. Orders and export demand picked up last month.
Factory production, led by inventory rebuilding at the end of 2011, is poised to keep expanding as the need to update equipment drives orders at companies like Caterpillar Inc. and demand for cars lifts sales at automakers. More growth in the industry will help cushion the world’s largest economy from a slowdown in Europe caused by the region’s debt crisis.
“Manufacturing will continue to grow,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Autos are a positive industry within manufacturing as there’s a lot of pent-up demand. Inventories are in a spot where they will be supportive of factory activity.”
The median forecast of economists was based on 80 projections in the Bloomberg survey. Estimates ranged from 53 to 56.
Stocks extended gains and Treasuries fell after the figures, with the Standard & Poor’s 500 Index climbing 1.1 percent to 1,326.76 at 10:22 a.m. in New York. The yield on the benchmark 10-year rose to 1.84 percent from 1.8 percent late Tuesday.

ADP Employment

A report earlier showed companies in the U.S. added 170,000 workers in January, reflecting gains in services and at small businesses. The increase was less than forecast and followed a revised 292,000 rise the prior month that was smaller than previously reported, the report from the Roseland, New Jersey- based ADP Employer Services showed today. The median estimate in a Bloomberg survey called for an advance of 182,000.
In China, factory indexes improved in January as the world’s second-biggest economy withstood weaker exports driven by Europe’s debt crisis. The official purchasing managers’ index increased to 50.5 from 50.3 in December. The data may have been distorted by a weeklong holiday. A separate gauge from HSBC Holdings Plc and Markit Economics rose to 48.8. European manufacturing contracted less than initially estimated in January as German output countered a slump in nations from France to Ireland. A factory gauge based on a survey of purchasing managers in the 17-nation euro region rose to 48.8 from 46.9 in December, London-based Markit Economics said today. It had previously reported a gain to 48.7. In Germany, Europe’s largest economy, output expanded for the first time since September.

Orders Increase

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The ISM’s production index decreased to 55.7 from 58.9. The new orders measure climbed to 57.6, the highest since April, from 54.8, and the gauge of export orders rose to 55 from 53.
The employment gauge was little changed at 54.3 after 54.8 in the prior month.
The index of prices paid increased to 55.5 from 47.5.
The measure of orders waiting to be filled rose to 52.5 from 48. The inventory index climbed to 49.5 from 45.5, while a gauge of customer stockpiles rose to 47.5 from 42.5. A figure higher than 50 means manufacturers are building stockpiles.
The manufacturing industry accounts for about 12 percent of the economy and was at the forefront of the recovery that began in June 2009.

Regional Figures

Regional reports reinforce the growth. New York-area factories grew in January at the fastest rate in nine months and manufacturing in the Philadelphia region expanded the most since October, figures from the Federal Reserve showed.
Caterpillar, the largest construction and mining-equipment maker, last month posted fourth-quarter earnings and forecast full-year profit that topped analysts’ estimates as demand rose for earth-moving machinery and trucks. The Peoria, Illinois- based manufacturer said it had a record $29.8 billion backlog of orders at the end of 2011.
Light-vehicle sales in January, set for release today, may have run at a 13.5 million seasonally adjusted annual rate, the average estimate of analysts surveyed by Bloomberg. The pace was 13.48 million at the end of 2011.
Ford Motor Co., the second-largest U.S. automaker, reported its 11th consecutive profitable quarter as sales rose and it boosted North American production by 14 percent. The Dearborn, Mich.-based company said the European market is worsening.
“We think this has the potential to be another tough year economically in Europe,” Chief Financial Officer Lewis Booth said on the “The Hays Advantage” on Bloomberg Radio on Jan. 27.
Federal Reserve officials said in their policy statement last month that they may leave interest rates low until 2014, in part because “strains in global financial markets continue to pose significant downside risks to the economic outlook.”

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