Manufacturing in U.S. expands at second-fastest rate since 2011

Source: Bloomberg Source: Bloomberg

Manufacturing in the U.S. expanded in December at the second-fastest pace in more than two years, a sign the industry will bolster growth in early 2014.

The Institute for Supply Management’s factory index eased to 57, from the prior month’s 57.3, which was the highest since April 2011, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate expansion. Orders were the strongest since April 2010 and a measure of factory employment climbed to a more than two-year high.

Factories are getting a boost from rising vehicle sales, which are encouraging automakers including General Motors Co. and Ford Motor Co. to introduce new models, while the housing rebound is spurring orders for building materials. Stabilization in overseas markets also will lift the outlook for the world’s largest economy.

“The conditions are in place for growth in manufacturing,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Increasing demand and less fiscal drag in 2014 will entice businesses to invest and hire more.”

The median forecast of economists surveyed by Bloomberg called for 56.8. Estimates of 66 economists ranged from 55.3 to 58. Manufacturing accounts for about 12% of the economy. The factory gauge averaged 53.9 for all of 2013, an improvement from 51.7 a year earlier.

The group’s new orders measure advanced to 64.2 from 63.6, and the gauge of employment increased to 56.9, the highest since June 2011, from 56.5.

Production Cools

The index of production cooled to 62.2 from 62.8 the prior month. The measure of orders waiting to be filled dropped to 51.5 from 54. The inventory index decreased to 47, the lowest since July, from 50.5, while a gauge of customer stockpiles rose to 47.5 from 45. A figure less than 50 means manufacturers are reducing stockpiles.

The index of prices paid increased to 53.5 from 52.5.

Manufacturing across the globe showed signs of uneven growth in December, according to other reports. In the euro area, an index of factory activity climbed to 52.7 from a November reading of 51.6, Markit Economics said. Manufacturing in Germany increased, while a gauge of factories in France dropped to a seven-month low. An index of U.K. manufacturing cooled as export demand weakened, and readings in China slipped.

One area of the U.S. economy that remains a bright spot is automobile purchases, which in November reached the best annualized sales pace since 2007.

GM, which brought out 18 new or revamped models in the U.S. in 2013, plans 14 more this year as the largest U.S. automaker improves its lineup from one of the industry’s oldest. Ford, the second-largest U.S. automaker, plans to start sales of 16 fresh or updated models, triple the prior year’s number.

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