Manufacturing in U.S. expanded more than forecast in January

Manufacturing in the U.S. expanded more than forecast in January, reaching a nine-month high and showing the industry is starting to improve.

The Institute for Supply Management’s manufacturing index climbed to 53.1 last month from December’s 50.2, the Tempe, Arizona-based group’s report showed today. Readings above 50 signal expansion. The figure exceeded the highest estimate in a Bloomberg survey of 86 economists. The median forecast was 50.7.

A fourth-quarter acceleration in consumer purchases and a rebound in business spending following a mid-2012 slump may help shore up production. The housing recovery and stabilization in overseas markets indicate factories may keep adding to growth in the world’s largest economy this year.

“There seems to be a positive turn,” Millan Mulraine, a New York-based economist at TD Securities LLC, said before the report. “Consumer demand and business investment were both strong toward the end of 2012, and any continuation of that augurs well for manufacturing this year.”

Estimates in the Bloomberg survey ranged from 49.2 to 52.5.

Today’s report showed the ISM’s production index increased to 53.6 from 52.6. The new orders measure rose to 53.3 from 49.7.

The employment gauge increased to 54 from 51.9 in the prior month.

Order Backlogs

The measure of orders waiting to be filled fell to 47.5 from 48.5. The inventory index climbed to 51 from 43. A figure higher than 50 means manufacturers are building stockpiles. A gauge of customer stockpiles rose to 48.5 from 47.

The index of prices paid increased to 56.5 from 55.5.

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

Recent reports have been mixed since the start of the year. The Federal Reserve Bank of Philadelphia’s general economic index dropped to minus 5.8 in January from 4.6 in December. New York Fed figures showed manufacturing contracted in January, falling for the sixth straight month to minus 7.8 in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Readings lower than zero signal contraction in these data.

In contrast, the MNI Chicago Report’s business barometer rose to 55.6 in January, the highest since April, after 50 in December, signaling business activity picked up.

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