Factory Activity Growth Fastest in 20 Yrs

Jan. 2, 2004
By Ros Krasny

CHICAGO (Reuters) - U.S. factory activity expanded at the fastest pace in 20 years in December, the Institute for Supply Management said on Friday, adding to evidence that a manufacturing recovery is under way and lifting the economy.

The institute said its barometer of manufacturing activity jumped to 66.2 in December from 62.8 in November. Wall Street economists had forecast the index at 61.0.

U.S. Treasury bond prices fell sharply on the data, while U.S. stock prices and the dollar rose.

"It's very positive for the overall economic outlook, suggesting continued momentum in the manufacturing sector," said John Silvia, chief economist with Wachovia Bank in Charlotte, N.C.

A reading above 50 in the index signals growth in the industrial sector, which comprises about a sixth of the U.S. economy. Factories were hard hit by the U.S. recession that ended in November, 2001 and have been slow to recover.

Manufacturing jobs have been even slower to rebound but according to the ISM survey are also on the way back.

ISM's jobs component was 55.5, up from 51.0 in November and was above 50 for the second straight month after being lower 37 straight months.

New orders, often seen as indicative of future growth, rose to 77.6 from 73.7, the highest since July, 1950. The prices index rose to 66.0 from 64.0 in November.

The monthly survey from Tempe, Arizona-based ISM is derived from data provided by purchasing executives at more than 350 industrial companies.

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