Manufacturing on the Rise, Job Gains Slow

U.S. manufacturing grew in January for the 30^th consecutive month, and the overall economy grew for the 32^nd consecutive month, according to the Institute for Supply Management index released Wednesday. “Manufacturing is starting out the year on a positive note, with new orders, production and employment all growing in January,” said Bradley J.Holcolmb, chair of the ISM Manufacturing Business Survey Committee.  

The Purchasing Manufacturers Index (PMI) rose 1 percentage point from December to 54.1 percent, its highest level since June 2011. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding. A sustained PMI in excess of 42.6 generally indicates an expansion of the overall economy.

The New Orders index increased to 57.6 percent, an increase of 2.8 percentage points from the previous month. Half of the 18 manufacturing industries surveyed reported growth last month. They include: Apparel, Leather and Allied Products; Petroleum and Coal Products; Machinery; Computer and Electronic Products’ Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; and Primary Metals.

Six industries reported decreases in January new orders: Plastics and Rubber Products; Furniture and Related Products; Chemical Products; Electrical Equipment; Appliances and Components; and Textile Mills.

After posting a 2.8 percent growth in the fourth quarter of 2011, U.S. economic growth is expected to slow. The ADP National Employment Report, also released Wednesday, showed that job growth slowed in January to a less than forecast 170,000 jobs, the smallest gains in three months. The Bureau of Labor Statistics will release its jobs report on Friday.

The housing market, plagued by fallen prices, restricted credit, and a surfeit of available homes, continues to be one of the most serious challenges to an economic recovery. Speaking at a northern Virginia community center today, President Barack Obama called the housing crisis “massive in size and scope” and detailed a proposal that would allow homeowners with privately held mortgages to refinance at lower rates even if they owe more on their homes than what they are worth, a situation plaguing a reported 11 million Americans. The proposal, if adopted by Congress, would save homeowners about $3,000 a year.