7/23/2014

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U.S. manufacturing expands at solid pace in December

U.S. manufacturing expands at solid pace in December
Employees at Sheffield Platers Inc. work on the factory floor in San Diego.
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WASHINGTON (AP) - U.S. manufacturing grew at a healthy pace in December as factories stepped up hiring and received more orders. The expansion suggests solid growth at the end of the year.

The Institute for Supply Management, a trade group of purchasing managers, said Thursday that its index of manufacturing activity slipped to 57 from 57.3 in November. But that's still the second-highest reading in the past 2 ½ years. And any reading above 50 signals growth.

A measure of new orders rose to the highest level since April 2010. And a gauge of hiring increased to its highest level since June 2011. Production and a measure of manufacturers' stockpiles fell.

"It is clear that growth remained strong at the end of last year and this should continue into 2014," said Paul Dales, an economist at Capital Economics.

Overseas demand is growing, but at a much slower rate, the survey found. A gauge of export orders fell to 55 from 59.5.

And a separate report this week showed factories in China expanded in December but at a slower pace than the previous month.

Still, the small decline in the U.S. survey doesn't dampen the outlook for American factories. The manufacturing index had increased for six straight months through November.

Americans are buying more cars and homes, both of which fuel factory output. Many homebuyers also purchase furniture, appliances and electronics. And companies are stepping up spending on large machinery and other equipment after holding back in the fall.

Other snapshots of manufacturing have also been healthy. Factory output rose in November for the fourth straight month, according to the Federal Reserve. A big increase in auto production fueled the gain.

Auto sales reached the highest level in nearly seven years in November. Car makers will report December figures on Friday.

Demand for long-lasting goods jumped in November, the government said last week, evidence that businesses are investing in facilities and equipment. That should help lift economic growth in the October-December quarter.

The improving trends have led manufacturers to step up hiring, creating more higher-paying jobs. Factories have added jobs for four straight months. In November, they hired 27,000 new workers, the most in 20 months.

Companies rapidly increased their stockpiles of goods in the July-September quarter, one reason factories have boosted output. That helped push economic growth to an annual rate of 4.1 percent, the best in nearly two years.

Companies aren't likely to restock inventories to the same extent in the current October-December quarter. But many economists have become more optimistic about the fourth quarter and expect growth will clock in at a solid 2.5 percent annual rate.
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