U.S. manufacturing activity grows at fastest pace since June

February 2, 2012

Manufacturing activity in the U.S. grew in January at the fastest pace in seven months, boosted by a sharp increase in new orders, The Associated Press reported.

According to the news outlet, the Institute for Supply Management, a trade group of purchasing managers, noted that its manufacturing index rose last month to 54.1 from the 53.1 that was reported for December. Expansion occurred in both months, as readings over 50 indicate that growth occurred in the sector.

The AP reported that consumers are purchasing more cars and trucks, while businesses ordered more machinery and other equipment. These factors have driven manufacturing activity in the U.S., which expanded for the 30th straight month.

Along with the increased consumer activity, both new orders and order backlogs increased by a significant margin. The index showed that the two numbers were nine-month highs, suggesting that manufacturers are struggling to meet the high level of demand. Economists noted, according to the news outlet, that this could mean more growth in production and employment in the near future.

"This is a very encouraging report on manufacturing activity that shows particular strength in leading indicators," John Ryding, an economist at RDQ economics, told the AP. His colleague Conrad DeQuadros told Bloomberg that the U.S. "manufacturing growth points to an acceleration in the economy."

This positive sentiment surrounding the manufacturing sector in the U.S. was shared by many economists, as the index provided evidence that American industry is making a comeback.

"Manufacturing jobs appear to be recovering, albeit at a modest pace," Michael Woolfork, senior currency strategist for BNY Mellon, told Reuters. "The ADP numbers this morning also indicate that we have sustained jobs growth. All in all, this is a report that's encouraging and is consistent with the current recovery, which should produce 2.5-3 pct growth this year."

MarketWatch reported that the new orders index, an indication of future demand, jumped 2.8 percent to 57.6. This sharp rise was mirrored by the prices-paid gauge, as it jumped to 55.5 from the 47.5 that was recorded in December.

According to the news outlet, nine of the 18 industries that were surveyed reported growth, led by the apparel and petroleum producers. The expansion in the U.S. was in sharp contrast to the continued contraction in Europe, as manufacturing activity fell across the Atlantic.