U.S. Manufacturing Index Rises in March as Expansion Continues

A U.S. manufacturing index unexpectedly rose last month as production increased and more factories added workers than at any time since Ronald Reagan was president.

“Plain and simple, this report tells us that the manufacturing sector is smoking,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn. “The breadth of the expansion as well as its speed is breathtaking.”

The Institute for Supply Management said Thursday that its factory index for March rose to 62.5, close to a two-decade high of 63.6 in January, from 61.4.

The index has now exceeded 50, signaling expansion, for 11 months.

In other reports Thursday, the number of Americans filing initial unemployment claims dropped to 342,000 last week from a revised 345,000, and producer prices rose less than expected in February, the Labor Department said.

The purchasing managers’ employment index rose to 57, the highest since December 1987, from 56.3 the previous month. That bolsters speculation that today’s monthly jobs report will show the first gains for manufacturing since July 2000. Total employment is projected to rise by 120,000 workers, the most since December 2000.

The number of Americans filing initial claims for jobless benefits declined to 342,000 last week, below the average for this year’s first three months, the Labor Department said. Initial claims dropped by 3,000 from a revised 345,000 the week before. Filings have averaged 351,460 this year, down from 402,100 for all of 2003.

U.S. producer prices rose 0.1% in February, restrained by declines in costs of drugs, light trucks and home heating oil, the Labor Department said separately.

The 0.1% increase in prices paid to factories, farmers and other producers that the Labor Department reported followed January’s 0.6% rise. Excluding volatile food and energy prices, the so-called core rate also climbed 0.1% after rising 0.3% a month earlier.

In another report, U.S. construction spending fell 0.1% in February, a second straight drop, led by declines in homebuilding and government projects, the Commerce Department said. The fall to a $921.1-billion annual rate of spending followed a revised 0.8% decline in January.