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

Manufacturing in the U.S. expanded in December at a pace that shows the industry is stabilizing after reaching a three-year low a month earlier.

The Institute for Supply Management’s manufacturing index climbed to 50.7 last month from November’s 49.5, which was the weakest since July 2009, the Tempe, Arizona-based group’s report showed today. Fifty is the dividing line between expansion and contraction. The median forecast of economists surveyed by Bloomberg called for a rise to 50.5.

Sustained growth in the U.S., in part due to a housing rebound, and steadying overseas markets are helping underpin factory orders and keeping manufacturing from faltering. At the same time, while lawmakers moved to extend tax cuts for about 99 percent of households, corporate confidence in the economic expansion will take time to build as Congress prepares to debate spending cuts and the debt ceiling.

“The worst part of the manufacturing slowdown is behind us,” Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report. “We’re seeing some decent consumer demand.” The possibility of fiscal tightening has been “limiting the ability of businesses to release their cash and increase investment.”

The median forecast was based on projections from 71 economists in the Bloomberg survey. Estimates ranged from 48 to 52.

The ISM’s production index decreased to 52.6 from 53.7. The new orders measure held at 50.3, and the gauge of export orders rose to a seven-month high of 51.5 from 47.

The employment gauge increased to 52.7, the highest since September, from 48.4 in the prior month.

Order Backlogs

The measure of orders waiting to be filled rose to 48.5 from 41. The inventory index fell to 43 from 45, while a gauge of customer stockpiles rose to 47 from 42.5. A figure higher than 50 means manufacturers are building stockpiles.

The index of prices paid climbed to 55.5 from 52.5.

Elsewhere, U.K. manufacturing unexpectedly grew in December at the fastest pace in 15 months. A gauge of factory activity rose to 51.4 from a revised 49.2 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said in London today.

In the euro-area, manufacturing continued to shrink. Markit’s gauge eased to 46.1 last month from 46.2 in November. Indexes for Germany, France and Italy all remained below 50 last month.

Manufacturing in the U.S., which accounts for about 12 percent of the economy, was at the forefront of the recovery that began in June 2009.

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