Manufacturing Activity Rises At Fastest Pace In Three Years

The Institute for Supply Management, a trade group of purchasing executives, said its manufacturing index read 55.9 in December after a 53.6 reading in November, the Associated Press reports. A reading above 50 indicates growth. It was the fifth straight month of expansion and the highest reading for the index since April 2006. Analysts polled by Thomson Reuters had expected a reading of 54.3.

A separate report by the institute on construction spending sounded a more cautionary note. Construction activity fell in November for a seventh straight month, as spending on both residential and commercial projects declined. The 0.6% drop was bigger than the 0.4% decline that economists had been expecting. Increased spending on federal construction projects, likely fueled by stimulus spending, was largely canceled out by lower state and local construction spending.

Still, the ISM said its index of new orders, a signal of future production, jumped last month to 65.5 from 60.3 in November, the highest level in five years. That indicates the overall index should keep climbing and could near 60 in coming months, economists said. The index’s peak in the last decade was 61.4 in May 2004. It bottomed at 32.9 in the midst of the recession in December 2008.

Other measures of manufacturing around the world also showed growth. China’s manufacturing sector expanded at its fastest rate in 20 months in December, according to a purchasing managers’ survey. In Europe, a similar survey in the 16 countries that use the euro rose to a 21-month high and a manufacturing index for Britain rose to a 25-month high.