Manufacturing Grows at Slower Pace in February

Thursday, 01 Mar 2012 10:15 AM

 

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Manufacturing activity grew more slowly in February as factories received fewer new orders and paid higher prices for raw materials.

The Institute for Supply management, a trade group of purchasing managers, said Thursday that its manufacturing index fell last month to 52.4 from 54.1 in January.

The reading was the lowest since November. Still, any reading above 50 indicates expansion.

New orders increased, but at a far slower pace than the month before. Production and employment also grew more slowly.

Exports increased sharply, a sign that Europe's debt crisis has not yet dampened overseas sales by U.S. factories as many had feared.

U.S. factory activity has expanded for 31 straight months, according to the index.

Manufacturing has grown in part because consumers are spending more on cars, appliances and computers. Auto sales have rebounded strongly from the spring, when Japan's earthquake and tsunami interrupted supply chains and fewer cars were available on dealer lots.

Businesses have also stepped up spending on industrial machinery and other capital goods last year, partly to take advantage of an investment tax credit. Orders for those goods slipped in January after the tax credit expired. But most economists expect demand for industrial goods to keep growing this year.

Industrial output jumped in January, the Federal Reserve said, after rising by the most in five years in December. And manufacturing expanded in all 12 of the Federal Reserve's bank districts, the Fed said in a separate report Wednesday.

Auto manufacturing, steel makers and other metal producers all reported solid growth, the central bank said. At the same time, some manufacturers expressed concerns that Europe's financial crisis and slowing economy could cut into their exports this year.

More hiring is helping to increase consumer spending and economic growth. The economy is likely to expand by about 2.5 percent this year, according to a survey by the National Association of Business Economics. That's up from 1.7 percent in 2011.

Manufacturers have been a big source of that hiring. The sector accounts for only about 9 percent of total payrolls but added 13 percent of the new jobs last year. In January, they accounted for one-fifth of the 243,000 net jobs added.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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