In the U.S., the manufacturing sector grew for the first time since January 2008; the key gauge of this, the Institute for Supply Management's manufacturing index, rose to 52.9 from 48.9 the previous month, driven by improvements in new orders and production. Levels above 50 indicate growth. Meanwhile, the purchasing managers' index for China swung into expansionary territory in March -- well before other nations -- and has stayed there ever since, but Tuesday's reading of 54.0 for August show activity expanded at its fastest pace in more than a year. And Japanese industrial output rose 1.9% in July, beating expectations.
The positive signs come on the heels of another report Tuesday showing similar strength in Europe. Though still contracting, the euro-zone manufacturing purchasing manager index rose to 48.2 in August from 46.3 in July, a 14-month high. The improvement came on the back of gains in Germany and France, but Spain and Italy posted declines. The U.K. showed unexpected weakness, as the nation's manufacturing sector shifted into contractionary territory. August's reading came in at 49.7 from 50.2 a month earlier.
Still, the August improvement in the U.S. is notable because many of the industries that improved aren't linked to automotive production. That signals an improvement in demand apart from the Cash for Clunkers program, which let people trade vehicles in for a credit toward more fuel-efficient models, helping boost consumer spending and manufacturing.
New orders were a driving force behind the manufacturing gains in the U.S., rising almost 10 percentage points to 64.9. Production and supplier deliveries, which tend to be tied to improvements in new orders, also rose.
In the midst of all the good news, hiring was still a weak spot in the U.S. manufacturing report. The index shows that employment was still contracting and some companies noted in their comments that layoffs were still ahead. Separate indicators released Tuesday showed mixed signs for the construction industry. The National Association of Realtors' pending home sales index rose to 97.6 in July from 94.6 in June. But construction spending feel 0.2% in July to a seasonally adjusted annual rate of more than $958 billion compared to the prior month, the Commerce Department said.
With hiring still struggling and housing working toward stabilization, healthier foreign economies could buoy the U.S. recovery. The manufacturing report's exports index climbed five percentage points to 55.5 in August.
"Apparently the dollar is at a level that foreign demand is going to be reasonably strong, said Norbert J. Ore, chairman of the ISM manufacturing survey. "That will also help us through the balance of the year if it continues."
Tuesday, September 1, 2009
More on the Manufacturing Data
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