NEW YORK: Manufacturing in the United States surged to a 20-year high at the start of the year as factories scrambled to meet demand, while consumer spending increased modestly during the holidays, according to the latest reports.
But even with improved factory output, manufacturers remained cautious about hiring, dampening hopes for a turnaround in production jobs.
The closely watched Institute for Supply Management (ISM) manufacturing index rose to 63.6 in January – the highest since late 1983 – from a revised reading of 63.4 the prior month.
“Manufacturing is in a cyclical upswing...and is poised for further growth over the coming months,” said Bear Stearns chief economist John Ryding.
The ISM survey’s new orders measure, a key barometer of future growth, was at the best level since the early 1970s. But the surge in factory output has yet to translate into jobs, and the employment index slipped to 52.9 from 53.5 in December.
Even though the US economy has picked up in the past six months, robust hiring has been the missing link in the recovery. The risk is that if the job market does not improve, consumer spending could falter.
Economists have been surprised that the national payrolls report has not shown an improvement in factory hiring after three years of declines. Most of the 2.4 million jobs lost over the past three years have been in manufacturing.
A separate report just released showed that one of the pillars of the US economy, construction spending, notching a fresh record high in December for the sixth month in a row.
Overall construction spending rose 0.4% to a seasonally adjusted US$933.2bil, the Commerce Department said, as low mortgage rates fuelled a strong housing market. – Reuters