Manufacturing in U.S. expands after reaching 3-year low

U.S. MANUFACTURING expanded in December after reaching a three-year low in November.
Posted 1/2/13

WASHINGTON - 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. While lawmakers moved to extend tax cuts for about 99 percent of households, corporate confidence in the expansion will take time to build as Congress prepares to debate spending cuts and the debt ceiling.

“We finished the year on an uptick, but there isn’t a firm rebirth of confidence on the part of businesses,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected 51 for the December factory index. “We could face a little bit of a bumpy period before turning to slow growth in manufacturing.”

The median forecast was based on projections from 71 economists in the Bloomberg survey. Estimates ranged from 48 to 52. For all of last year, the factory gauge averaged 51.7, down from 55.2 in 2011 and 57.3 in 2010.

Stocks gain

Stocks held gains after the figures as lawmakers passed a bill averting immediate tax increases on most Americans. The Standard & Poor’s 500 Index jumped 1.8 percent to 1,452.42 at 10:51 a.m. in New York.

“We can take away a lot of positives from the December report,” Bradley Holcomb, chairman of the ISM factory survey, said on a conference call with reporters. The step taken to avoid the so-called fiscal cliff “is positive news” and “bodes well for manufacturing.”

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.

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.

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