WASHINGTON (AP) — U.S.
factories expanded last month at the fastest pace since June 2011 on a jump in
orders. The report signals that manufacturing output could strengthen in coming
The Institute for Supply
Management, a trade group of purchasing managers, said Tuesday that its
manufacturing index rose to 55.7 in August from 55.4 in July. That topped the
index’s 12-month average of 52. A reading above 50 indicates growth.
A gauge of new orders rose
nearly five points to 63.2, the highest level in more than two years. At the
same time, production increased more slowly than in July, and factories added
jobs at a weaker rate. Despite the drop, production reached its highest level
in 2½ years.
The overall improvement
contrasts with other recent reports that had pointed to a slowdown in
manufacturing. The ISM’s survey found broad-based growth, with 15 out of 18
industries reporting expansion and only one reporting contraction. That
suggests that factory production could accelerate this year.
“The data unambiguously
point to a pickup in … manufacturing output growth after a weak” second
quarter, Jim O’Sullivan, an economist at High Frequency Economics, said in a
note to clients.
The Federal Reserve will
closely examine Tuesday’s report, which comes two weeks before Fed policymakers
will decide whether to slow their bond-buying program. Chairman Ben Bernanke
has said the Fed will scale back its purchases this year if the economy
continues to strengthen. The $85 billion in monthly bond purchases have been intended
to keep interest rates low.
The jobs report for August, to
be released Friday, is the most important remaining economic report the Fed
Orders from overseas also rose,
a sign that improving economies in Europe and China may be boosting U.S.
manufacturers. The 17 countries that use the euro grew in the April-June
quarter after six quarters of recession.
And a private survey of
purchasing managers in China found that manufacturing in that country expanded
for the first time after shrinking for three months. It added to other recent
evidence that China’s economy is stabilizing after a slowdown.
Last month, a Fed report found
that factory output dipped in July. But that slip reflected a slowdown in auto
production, which many analysts expect to be only temporary.
Companies also cut back in July
on orders for long-lasting U.S. factory goods, according to a government report
last week. That drop was driven by a sharp fall in demand for commercial
aircraft, a volatile category.
But businesses also sharply
reduced their orders for capital goods such as computers, electrical equipment
and other items. That decline may signal that business investment, an important
driver of the economy, could slow.
The economy grew at a modest
2.5 percent annual rate in the April-June quarter, the Commerce Department
estimated last week. That was better than the government’s initial estimate of
But many economists now think
the economy could slip a bit in the July-September quarter to a 2 percent
annual growth rate or less.
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