Manufacturing Activity Stays Strong in February

A gauge of U.S. manufacturing in February held close to a two-decade high and more factories said they were hiring to meet demand, an industry report showed Monday.

The Institute for Supply Management’s factory index slipped to 61.4 last month from 63.6 in January. Still, it was the 10th straight month the index exceeded 50, which signals growth.

The purchasing group’s measure of factory employment rose to its highest level since December 1987, suggesting that more manufacturers were hiring to churn out computers and other equipment.

Separate reports from the Commerce Department found that personal spending increased for a third month in January, by 0.4%, and construction spending declined.

The rise in personal spending followed a 0.5% December increase as Americans spent more on services and bought nondurable goods such as clothing. The report showed that incomes increased 0.2% after a 0.3% rise a month earlier.

The Commerce Department also reported a 0.3% drop in construction spending in January, the first decrease in eight months. Residential building was little changed, while nonresidential construction fell 0.8%.

ISM reported that its employment index rose to 56.3 from 52.9. On Friday, the Labor Department is forecast to say the economy added a net 130,000 jobs in February, the most since November 2000.

Tempe, Ariz.-based ISM surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics. Manufacturing accounts for about one-seventh of the economy.

The index of inventories rose to 49.4 from 48.9, indicating that inventories are being run down at a slower pace. The new-orders index, which accounts for about a third of the total, declined to 66.4 from 71.1 in January. The production index, a gauge of work being performed, fell to 63.9 from 71.1.

ISM also reported that the index of backlog of orders rose to 62 from 60.5. The index of new export orders fell to 54.9 from 57.5. The supplier deliveries index, which measures how long it takes to get materials, rose to 62.1 from 60.4. The index of supply managers’ prices paid jumped last month to 81.5, the highest since February 1995, from 75.5.

Factory production rose in each of the last five months of 2003, pushing the amount of capacity in use to 74.6%, 2 percentage points more than the 20-year low reached in May.

The rate is still below the 81.1% average during the expansion of 1991 to 2001.