December manufacturing index rises most since '83
NEW YORK -- The nation's manufacturing sector, thrashed by the recession and achingly slow to recover, finished 2003 with its most robust month of growth in two decades.
The Institute for Supply Management reported yesterday that its manufacturing index jumped to 66.2 in December, from 62.8 the previous month, strong evidence that the economic turnaround continues to pick up steam.
The reading was the highest since December 1983 for a sector that has shed millions of jobs over the past three years. It marked the sixth consecutive month of expansion and was significantly higher than the 61 forecast by analysts.
A reading above 50 indicates expansion, and one below 50 indicates manufacturing activity is contracting. From March through June, the index was below 50.
Economists said that while the beleaguered factory sector still has much ground to make up, it is firmly in recovery mode, helped along by low interest rates and a falling dollar, which makes US-produced goods cheaper overseas.
"Manufacturing is really the last piece of the puzzle that is falling in place to produce broad-based, sustained economic growth," said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis.
The momentum is particularly evident in new orders to factories, said Norbert J. Ore, chairman of the institute's manufacturing survey committee. A component index tracking new orders reached its highest level since 1950, rising to 77.6 in December from 73.7 in November, he said.
"The strength in December's data provides significant encouragement for prospects in the first quarter of 2004," Ore said.
An index measuring factory production also rose, to 73 from 68.3 in November. ISM's measure of factory employment rose to 55.5 from 51.
Of the 20 industries making up the sector, 17 reported growth, led by instruments and photographic equipment, leather, and furniture. Two industries, paper and chemicals, did not see a pickup. ISM did not gather enough responses from the last remaining industry, petroleum, to gauge growth.
"The month-over-month growth from November to December indicates a rapid recovery taking place in the sector, though there are still some businesses lagging and wondering when they will see the improvement that others are experiencing," Ore said.
But Sohn noted that the growth comes in a sector that remains far from what it was a few years ago, with millions of jobs lost. Job growth at factories will continue to be limited in the coming year, with manufacturing continuing to shift overseas, he said.
