Manufacturing increase could indicate brighter economy

U.S. manufacturing grew in February for the first time in 19 months, a sign the recession that began last March may have run its course.



The Institute for Supply Management’s factory index rose to 54.7 last month from 49.9 in January. A reading above 50 signals expansion, and the last time the index exceeded that level was July 2000. Fourteen out of 20 industries in the survey reported
growth, the group said.



“Industry by industry there is some sense that things are improving,” said Ralph Larsen, chief executive officer of Johnson & Johnson, in an interview at the Business Council meeting in Boca Raton, Florida. “Orders are a little firmer. Inventories are
being rebuilt. So there’s just a bit of a crack of sunshine.”



Stocks soared after the report on March 1. The Dow Jones Industrial Average rose 110 points, or 1.1 percent, and the Nasdaq Composite Index rose 29 points, or 1.7 percent. The dollar rose against the yen and euro.



Treasury securities fell as the factory gains suggested to investors that Federal Reserve policy makers may start raising interest rates to keep the economy from overheating. The 4 7/8 percent note maturing in 2012 fell 3/4 point, pushing up its yield
10 basis points to 4.97 percent. A basis point equals 0.01 percentage point.



General Motors Corp. and Ford Motor Co. have boosted production plans as consumer spending holds up better than expected. Inventories of autos and other goods are low enough that firms must restart some assembly lines to fill orders.



Analysts had expected a reading of 51, based on the median of 63 forecasts in a Bloomberg News survey. The Tempe, Arizona, group surveys more than 400 companies in 20 industries, including clothing, printing, furniture and plastics. Manufacturing accounts for about one-sixth of the U.S. economy.



Consumers’ incomes and spending rose more than expected in January, a sign that demand for manufactured goods will increase in the months ahead. Incomes rose 0.4 percent last month, the largest gain in six months, and spending also increased 0.4
percent, the Commerce Department said. Analysts expected a 0.1 percent rise in incomes and a 0.3 percent gain in spending.



Bloomberg News