Manufacturing in U.S. expands after reaching three-year low

Regional Figures

Recent regional reports show a mixed picture. Manufacturing in the Philadelphia area unexpectedly expanded in December to an eight-month high, while New York-region factories shrank for the fifth straight month.

The automobile industry remains one source of growth. Cars and light trucks sold at a 15.5 million annual rate in November, the most since February 2008, boosted in part by buyers replacing cars damaged by superstorm Sandy, according to data from Ward’s Automotive Group.

An improving housing market also is helping manufacturers such as Illinois Tool Works Inc., a maker of welding equipment, construction supplies and auto parts.

“On the construction side, certainly we do expect housing starts to get better from where they’ve been,” Ronald Kropp, chief financial officer of Glenview, Illinois-based Illinois Tool Works, said on a Dec. 14 conference call with analysts. “Offsetting that is more than 50 percent of our construction business is outside of the U.S., and Europe and Australia, which is a big piece of it, is still slowing or negative. So, there are some upsides on the U.S. side from residential, but offset by international.”

Corporate Outlook

American manufacturers are more optimistic about the outlook for sales and spending this year than service providers, signaling that factories will support the economic expansion after they slumped in recent months, according to a survey released Dec. 11 by the ISM group.

Purchasing managers at factories anticipate sales will grow 4.6 percent in 2013 and business investment will increase 7.6 percent, the report showed. By comparison, service providers estimate revenue will grow 4.3 percent this year and that capital spending will rise 7 percent, the ISM said.

There are also signs that the worst of the slowdown in overseas markets is over. China’s manufacturing expanded at the fastest pace in 19 months in December, boosting optimism that a recovery in the world’s second-biggest economy is gaining traction, according to data this week.

Bloomberg News

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