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U.S. manufacturing grew at the fastest pace in seven months in January despite expectations for a slowdown in the new year.
The Institute for Supply Management’s manufacturing index rose to 54.1, from 53.1 in December. Any figure greater than 50 signals expansion.
Orders and export demand picked up last month, while factory production, led by inventory rebuilding at the end of 2011, is poised to keep expanding throughout the year as the need to update drives orders at companies like Caterpillar (NYSE:CAT) and demand for new autos.
Manufacturing growth could help cushion the U.S. economy from a slowdown in Europe being caused by the sovereign debt problems.
“Manufacturing will continue to grow,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Autos are a positive industry within manufacturing as there’s a lot of pent-up demand. Inventories are in a spot where they will be supportive of factory activity.”
A pick-up in manufacturing could support private sector job growth. It was the manufacturing industry, which accounts for about 12 percent of the U.S. economy, that was at the forefront of the recovery when it began in June 2009.
The ADP National Employment Report today showed the pace of job creation in the U.S. to be slowing, with the private sector reportedly adding 170,000 workers in January following a revised 292,000 rise in December that was smaller than previously reported.
The ISM’s production index decreased to 55.6 from 58.9, while its measure of new orders climbed to 57.6, the highest since April, from 54.8. The gauge of export orders rose to 55 from 53. The employment gauge was little changed at 54.3 after a reading of 54.8 in December.
The prices paid index increased to 55.5 from 47.5 as the measure of orders waiting to be filled rose from 48 to 52.5. The inventory index rose from 45.5 to 49.5, while a gauge of customer stockpiles rose from 42.5 to 47.5. A figure below 50 means that manufacturers’ stockpiles are shrinking, though at a demonstrably slower pace in January than in the previous month.
Regional reports back up the ISM data. Federal Reserve figures show that New York-area factories grew in January at the fastest rate in nine months, while manufacturing in the Philadelphia region expanded the most since October.
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