Factory activity rises
WASHINGTON — U.S. manufacturing activity grew in January at the fastest pace in seven months, boosted by a rise in new orders. Builders ended a poor year for construction by spending more on homes and projects for the fifth straight month. And U.S. auto sales are off to a strong start this year, continuing their brisk pace from late 2011.
The reports bolster other data showing the U.S. economy started the year strong.
The Institute for Supply Management, a trade group of purchasing managers, said Wednesday that its manufacturing index rose last month to 54.1 from 53.1 in December. Readings above 50 indicate expansion.
Consumers are buying more cars and trucks, while businesses ordered more machinery and other equipment. That has driven manufacturing, which expanded for the 30th straight month.
Both new orders and order backlogs rose to nine-month highs. Increasing order backlogs suggest manufacturers are lacking the capacity to meet demand. That could mean more growth in production and employment in the near future, economists said.
Export orders also rose, a sign that U.S. manufacturers haven’t yet been affected by Europe’s slowing economy.
“This is a very encouraging report on manufacturing activity that shows particular strength in leading indicators,” said John Ryding, an economist at RDQ Economics.
The report followed other healthy readings on manufacturing in China, Germany and the United Kingdom.
“A raft of business surveys around the world ... have signaled a better than expected start to 2012 for many countries,” said Chris Williamson, chief economist at Markit, a financial information provider.
Separately, the Commerce Department said spending on construction projects rose 1.5 percent in December, the fifth straight monthly gain. That pushed spending to a seasonally adjusted annual rate of $816.4 billion, the highest level in 20 months.
The gains coincide with other signs that show the troubled housing industry may be improving. Builders are more confident after seeing more interest in homes, and single-family home construction rose in the final three months of last year.
Still, the construction industry remains weak. Spending on all building projects in 2011 was just $787.4 billion. That’s 2 percent lower than the previous year and roughly half the level economists consider healthy.
The best indication of the U.S. economy’s health will come Friday, when the government reports on January hiring and unemployment.
Economists expect the economy added 155,000 net jobs, the seventh straight month of solid hiring. The unemployment rate is expected stay for the second month at 8.5 percent, near a three-year low.
Factories are still adding jobs but at a slower pace than in December, according to the ISM report.
Among automakers’ sales, Chrysler had its best January in four years. Toyota and Honda were back in the game, getting boosts from important new vehicles. Volkswagen, which wants to aggressively expand in the U.S., reported big increases.
The only loser among the major automakers was General Motors Co., whose sales fell 6 percent from a strong January last year.
Sales of cars and trucks rose 11 percent to 913,287 in January, kicking off what is expected to be the strongest year for the industry since the recession.
Jesse Toprak, vice president of industry trends for TrueCar.com, said demand is growing as the economy improves.
“For the first time in several years, we are starting the year off with a warm and fuzzy feeling,” he said.
If sales stay at the same pace as this January, they would reach 14.2 million, up from 12.8 million in 2011, according to Autodata Corp. While this year’s projection is below the 2000 peak of 17.3 million, it’s better than the 10.4 million trough in 2009.
One reason car sales are improving is that buyers need to replace aging vehicles. The average age of an American vehicle is a record 10.8 years, nearly two years older than a decade ago.
Low interest rates and greater loan availability also spurred demand.