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US Manufacturing on Rebound

  • Michael Bowman

The fledgling U.S. economic recovery appears to be getting a boost from manufacturing, with orders for factory goods and production registering sharp increases last month.

After a long and punishing recession, America's manufacturing sector is showing signs of life. Manufacturing activity expanded for the sixth consecutive month in January, with a private group's manufacturing index registering 58.4, up from 54.9 in December. Any reading above 50 indicates growth in U.S. manufacturing.

Norbert Ore heads the Institute for Supply Management, which tabulates the index.

"It represents [the index shows] six months of growth in manufacturing, a very strong trend towards growth in the manufacturing sector," said Norbert Ore. "Overall, I think this is the business cycle working. Inventories are low. Employment is starting to pick up ever-so-slightly. So I think it [manufacturing strength] is very sustainable."

Ore was speaking on Bloomberg Television.

New orders for manufactured goods surged to the highest level since 2004, with order backlogs also expanding. Current production reached a level not seen in nearly six years. Overall, 13 of 18 industries say they are growing, led by the apparel and machinery sectors.

Economists say, throughout the recession, businesses slashed inventories to match depressed demand for goods. With the U.S. economy recording positive growth for two consecutive quarters, businesses have no choice but to place new orders to replenish their depleted stocks of merchandise.

Meanwhile, the U.S. Commerce Department is reporting that personal incomes and consumer spending both rose modestly in December. On a more somber note, American home building fell 1.2 percent, more than double the drop that analysts had expected.

Will a growing economy and a revitalized manufacturing sector translate into job creation and a reduction in double-digit U.S. unemployment? Yes, but not immediately, according to the ISM's Norbert Ore.

"We are going to see a very slow recovery as far as jobs are concerned," he said. "[We are] still a long way from employment growth."

The latest monthly reading on the U.S. unemployment rate will be issued Friday. It is expected to be little-changed from December's figure of 10 percent.