Manufacturing may help US fight recession

10-10-2011

Factory activity in the US expanded at a faster pace than expected in September as production and hiring increased – a new sign of resilience in manufacturing despite faltering economic growth.

According to a government report released recently US construction spending also unexpectedly rebounded in August from a drop in July as outlays on state and local government building projects rose sharply.

This latest activity suggests that manufacturing could help keep the US economy from slipping into a new recession.

Other recent data offered more good news for the troubled US economy, with strong demand for new motor vehicles putting sales on track to surpass August's rate.

"That hardly sounds like an economy flat on its back. The economy is still moving forward. But no one should confuse direction with speed," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

September marked the 26th straight month of expansion in a sector that has shouldered the broader economic recovery, and the factory report implied that an outright contraction in output would probably be avoided.

The Institute for Supply Management said its index of national factory activity rose to 51.6 last month from 50.6 in August, boosted by a rebound in production and increased factory hiring. But new orders fell for a third month.

Economists had expected the index to edge down to 50.5. A reading above 50 indicates expansion in manufacturing.

The growth in US manufacturing is bucking a global trend. Factory activity in Europe and Asia slumped in September to levels not seen since the depths of the financial crisis as export demand dropped. 

The Global Manufacturing PMI, compiled by JPMorgan with research and supply organizations, contracted for the first time in more than two years.

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