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Manufacturing sector sees growth in down economy

WASHINGTON — It's a rare bright spot in an otherwise troubled economy: The nation's manufacturing sector has now grown for a solid year, and more of its companies say they're ready to hire.

Chipmaker Texas Instruments says its business has recovered to prerecession levels. Intel, which makes semiconductors, posted its best quarterly profit in a decade. And chemical giant DuPont says its sales volume is up and recently raised its prices.

The Institute for Supply Management said Monday its manufacturing index slipped in July, to 55.5 from 56.2 in June. But it was the 12th straight month of readings above 50, which indicates expansion. At the depths of the recession, the index was closer to 30.

"Yes, the pace eased back a touch, but it was nothing to be worried about," said Joel Naroff, president and chief economist for Naroff Economic Advisors.

Measures of production and new orders, which signal future business, both grew again, although more slowly than in June. And more manufacturers said they were willing to hire people.

The report, which comes out on the first business day of the month, surveys production managers at about 400 companies around the country, makers of products ranging from furniture and computers to food and tobacco.

Manufacturing accounts for about a fifth of U.S. economic activity, so it can't carry the recovery on its own. But at a time when the housing market, consumer spending and other sectors of the economy are limping along, any sustained growth is welcome news.

"Manufacturing has led the entire recovery," said Brian Bethune, chief financial economist at IHS Global Insight.

The manufacturing index peaked at 60.4 in April. Its low for the recession was 32.5, in December 2008.

The July report suggests that manufacturing will grow for the rest of the year, and more quickly than the broader economy, said Dan Meckstroth, chief economist for the Manufacturers Alliance/MAPI, an industry association.

Businesses are investing more money on equipment and software, instead of new workers. That is helping them grow at a time when customers are spending less.

Democrats on Capitol Hill seized on the success of manufacturing to make the case that their economic strategies are working, highlighting the creation of 136,000 jobs since December. Manufacturers have added jobs for six straight months for the first time since 2006, they said.

Manufacturing sector sees growth in down economy 08/02/10 [Last modified: Monday, August 2, 2010 8:17pm]
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