Growth in Manufacturing Is Highest in Almost a Year

By REUTERS

Published: May 1, 2012

WASHINGTON (AP) — Manufacturing grew last month at the fastest rate in 10 months, suggesting that the economy is healthier than recent data had indicated. 

New orders, production and a measure of hiring all rose. The April survey from the Institute for Supply Management was a hopeful sign ahead of Friday’s monthly jobs report and helped the Dow Jones industrial average end the day at its highest level in more than four years.

 The institute, a trade group of purchasing managers, said Tuesday that its index of manufacturing activity reached 54.8 in April, the highest level since June. Readings above 50 indicate expansion.

 The increase surprised analysts, who had predicted a decline after several regional reports showed manufacturing growth weakened last month. The gain led investors to shift money out of bonds and into stocks.

 The manufacturing index is closely watched in part because it is the first major economic report for each month. April’s big gain followed a series of weaker reports in recent weeks that showed hiring slowed, applications for unemployment benefits rose and factory output dropped.

 “This survey will ease concerns that the softer tone of the incoming news in recent months marked the start of a renewed slowdown in growth,” Paul Dales, an economist at Capital Economics, said in a note to clients. “We think the latest recovery is made of sterner stuff, although we doubt it will set the world alight.”

 The latest reading is well above the recession low of 33.1 and above the long-run average of 52.8. But it is still below the prerecession high of 61.4.

 Daniel J. Meckstroth, chief economist at the Manufacturers’ Alliance, noted that in the past 20 years, the index has been at or above 54.8 only one-third of the time.

 A measure of employment in the institute’s survey rose to a 10-month high. That indicates that factories are hiring steadily.

 A gauge of new orders jumped to its highest level in a year. That could signal faster production in the coming months. Export orders also rose, offsetting worries that weaker economies in Europe and China could slow American exports.

 A separate report showed China’s factory sector is still growing. A survey of purchasing managers in that country found that the manufacturing sector expanded for the fifth straight month in April.

 Rich Bergmann, managing director of Accenture’s global manufacturing practice, said large manufacturers were driving the nation’s growth. They are pushing their suppliers to increase output, which has led many to hire more workers.

 Large companies are also helping smaller companies in their supply chain, Mr. Bergmann said, by guaranteeing a certain level of orders or helping smaller companies obtain financing to expand.

 “There’s just a tremendous trickle-down effect in these industries,” Mr. Bergmann said. “That’s a very positive trend that we think will continue.”

 Boeing reported a 58 percent jump in profit in the January-March quarter. Orders for its more-fuel-efficient 737 jetliner soared. The company added 11,000 employees last year.