Updated November 29 at 12:25pm

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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.

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