U.S. Manufacturing Surges to 2004 High

New orders and production sub-indexes of the PMI were above 60% which is 'exceptionally' strong.

The manufacturing sector kicked off the year with a strong surge in January, The Institute for Supply Management showed on Feb. 1. It is the sixth consecutive month of expansion in the sector leading the economic recovery.

The Institute for Supply Management said its manufacturing index, also known as the purchasing managers index, climbed to 58.4% in January from December from 54.9% in December.

It was the highest PMI reading since August 2004, when the index registered 58.5%.

The reading was much stronger than the 55.5% expected by most analysts. Any number above 50% indicates growth.

"This month's report provides significant assurance that the manufacturing sector is in recovery," said Norbert Ore, head of the ISM survey committee. Ore pointed out that both the new orders and production sub-indexes were above 60%, "indicating strong current and future performance for manufacturing."

Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI points out that "ll the component indicators were moving in a positive direction in January, including the index for production which was exceptionally strong. There is a major inventory swing underway in the manufacturing sector that explains why industrial activity is so strong.

"Firms were previously in a panic mode and drastically slashed their inventories by reducing production, but now they find themselves low on materials and components," he added. "Once orders started rising again there is an acceleration in production to catch up with underlying demand. U.S. manufacturing physical production was up 4.5% in December from its trough in June 2009. Furthermore, a global recovery in world industrial activity has helped U.S. exports and supplemented domestic demand. The overall tenor of the ISM report is very positive and a good way to start 2010."

Copyright Agence France-Presse, 2010

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