An index of U.S. manufacturing rose last month to the highest level since October 2000 as new orders and production increased, a sign factories are starting to recover from a 17-month slump.
The manufacturing index of the Institute for Supply Management, formerly known as the National Association of Purchasing Management, increased to 48.2 last month from 44.5. A month after the September terrorist attacks slowed business, the index was the lowest since February 1991. An index measuring new orders surged to its highest level in 20 months, suggesting manufacturers such as General Motors Corp. will boost production to meet increased demand and help the economy rebound from its first recession in a decade. “It looks as if manufacturing’s long, cold winter is about to end and that holds out real hope that the overall economy will be picking up really soon, if it hasn’t already,” said Joel Naroff, president of Naroff Economic Advisors, Inc. in Holland, Pennsylvania. The new orders index rose to 54.9 from 48.8, showing that the number of companies reporting an increase exceeded those reporting a decline. Readings above 50 signal expansion and those below 50 indicate contraction. The overall index has been below 50 since July 2000 and producers such as Occidental Petroleum Corp. and Foamex International Inc. continue to shutter plants and cut jobs to cope with sluggish demand. U.S. Treasury securities fell after the manufacturing index suggested the economy is recovering, reducing the chances the Federal Reserve will lower interest rates later this month. The 5 percent Treasury note maturing in August 2011 fell 5/8 point, pushing up its yield 8 basis points to 5.11 percent. The December rise was the second straight for the index. The two-month increase was the biggest since January-February 1983, at the end of a 16-month recession. The Tempe, Arizona, group surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics. Manufacturing accounts for about one-sixth of the economy. The manufacturing index averaged 43.9 a month last year, the weakest annual reading since an average of 38.5 in 1982, when the economy was in recession, and the third-worst since the survey began in 1948. Shrinking economies in the U.S., Japan and Germany have reduced global manufacturing. An index of European manufacturing contracted in December for a ninth straight month. The Reuters Purchasing Managers’ Index for the dozen nations sharing the euro rose to 44.1 from November’s 43.6. While a reading below 50 shows contraction, as it does for the U.S. survey, the increase suggests manufacturing in Europe may recover in coming months. In the U.K., which hasn’t joined the euro, manufacturing shrank at the fastest pace in three years. At the same time, stocks of finished goods fell at the most in a decade and an index of orders rose to the highest in five months. In today’s U.S. supply managers’ report, the production index, a gauge of work being performed, rose to 50.6 in December from 47.1. The production index is the highest since September. General Motors boosted production plans by 15,000 vehicles for the fourth quarter and will raise first-quarter output by 7.1 percent after no-interest financing incentives boosted sales and cut into stockpiles of popular models. November was the fifth best month on record for auto industry sales. That followed a record pace in October and may have made 2001 the second-best year ever. Still, consumer and business demand have slowed since the recession started in March of last year. That explains why companies have sold from stockpiles instead of ordering more goods from manufacturers. Total U.S. business inventories fell 1.4 percent in October, the largest decline in at least a decade, Commerce Department statistics showed last month. The institute’s inventories index fell to 37.7 from 37.9, indicating manufacturers are still reducing stockpiles at a faster pace. The employment index rose to 40.5 from 35.7. The backlog of orders index rose to 39.5 from 38.5. The new export orders index fell to 48.0 from 49.3. Occidental said last week it will temporarily close a Texas chemical plant because demand for some of its products has fallen as plastics manufacturers reduced production. The plant will be closed indefinitely and will affect 200 employees and 70 contract workers. Foamex, a maker of polyurethane foam used in carpets and furniture, said it will eliminate about 10 percent of its workforce next year and close eight plants to reduce costs. Factories probably cut another 85,000 workers last month bringing total manufacturing job losses to more than 1.5 million. The uneven pace of recovery means factories won’t fully rebound until the second half of 2002, a survey of its members by the purchasers’ association showed last month. Of the 375 manufacturers questioned, 59 percent said they expect business to improve from July to December this year. One in three said they see business picking up in the first half of this year, while 19 percent said they were “optimistic” about business for all of 2002. Inflation remained in check. The prices-paid index rose to 34.7 in December from 31.6 the month before. The economy probably contracted at a 1.4 percent annual pace in the fourth quarter after shrinking at 1.3 percent pace between July and September, according to analysts surveyed by Bloomberg News. By the second quarter of this year, the economy will grow at a 2.5 percent pace, the same survey showed. Bloomberg News For Rhode Island manufacturers, ISO 9001 has been much more than a certificate on the…ISO 9001:2026: A Practical Opportunity to Build for What’s Next
