Manufacturing in U.S. expands at strongest pace since 2011

Manufacturing in the U.S. expanded at a faster pace than forecast in February, reaching the highest level since June 2011 as factories boosted production.

The Institute for Supply Management’s factory index advanced to 54.2, from 53.1 in January, the Tempe, Arizona-based group said today. The figures exceeded the most optimistic forecast in a Bloomberg survey in which the median projection was 52.5. A reading greater than 50 signals expansion.

Orders expanded the most in almost two years, the report showed, as manufacturers such as Applied Materials Inc. emerged from an industry setback in the second half of 2012. The production gains complement a rebound in the housing market and help underpin the economy amid budget disputes in Washington.

“There is some momentum being built in manufacturing,” said Tom Simons, an economist at Jefferies Group Inc. in New York, whose forecast of 54 was the highest in the Bloomberg survey. “It’s encouraging that pent-up investment demand is finally being released after being restrained by the fiscal cliff.”

Stocks trimmed losses as the figures. The Standard & Poor’s 500 Index dropped 0.1% to 1,512.46 at 10:35 a.m. in New York, after falling as much as 0.9% earlier.

Estimates from the 81 economists surveyed by Bloomberg ranged from 50.5 to 54. The gauge averaged 51.7 in 2012 and 55.2 in 2011.

China Manufacturing

Elsewhere, two Chinese manufacturing indexes showed a slower-than-estimated pace of expansion in February. The official Purchasing Managers’ Index was 50.1 in February, the weakest in five months and down from 50.4 in January, according to a report from the National Bureau of Statistics and China Federation of Logistics and Purchasing today in Beijing. A separate gauge from HSBC Holdings Plc and Markit Economics dropped to a four-month low of 50.4 from 52.3.

In the U.K., manufacturing unexpectedly shrank last month as orders plunged. A gauge of factory activity plunged to 47.9, compared with a revised 50.5 in January, Markit and the Chartered Institute of Purchasing and Supply said today in London.

Manufacturing in the euro region contracted for a 19th straight month. Markit’s index held in February at 47.9. While the gauge for Germany, the area’s largest economy, climbed to 50.3 from 49.8, Italy’s dropped to 45.8 from 47.8.