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Factory output gives a lift to economy

Though factories are busy, home builders are on pace to suffer the worst two years for new-home sales since 1963. Though factories are busy, home builders are on pace to suffer the worst two years for new-home sales since 1963. (Seth Perlman/ Associated Press)
Associated Press / May 3, 2011

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WASHINGTON — The manufacturing sector has expanded this year at the fastest pace in a quarter-century, boosted by a weak dollar that makes US goods cheaper overseas.

Strong factory production could help the economy rebound after weak growth in the first three months of this year. But the construction industry is struggling, and manufacturing alone won’t drive enough job growth to reduce the unemployment rate. And rising prices are threatening many companies’ profit margins.

The Institute for Supply Management said yesterday that manufacturing expanded in April for the 21st straight month. Though its index declined to 60.4, it’s down only slightly from the previous two months. February’s reading of 61.4 showed the fastest expansion in nearly seven years. Above 50 signals growth.

“In April, there was no meaningful slowdown in what has become the most important sector in the economy,’’ said Dan Greenhaus, economic strategist at Miller Tabak.

The index has topped 60 every month this year, the best four-month stretch in 27 years, said David Resler, an economist at Nomura Securities.

Companies are buying more industrial machinery and computers, spurring much of the growth in factory output. Consumers are buying more cars.

And the dollar has declined 8 percent this year against a basket of six other currencies. That helped fuel a 7.8 percent rise in exports in the first three months.