updated 2/2/2004 10:52:30 AM ET 2004-02-02T15:52:30

The nation’s manufacturing sector continued to rebound strongly in January, fresh evidence that the economic recovery is solidifying, an industry group reported.

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The Institute for Supply Management said Monday that its manufacturing index rose to 63.6 in January from 63.4 in December. The new reading was slightly below the 64 reading forecast by analysts.

An index reading above 50 indicates expansion; one below 50 indicates that manufacturing activity is contracting. From March through June, the manufacturing index was below 50, but the new reading marked the eighth consecutive month of expansion.

“The manufacturing sector gained momentum in January,” said Norbert J. Ore, chairman of the institute’s manufacturing business survey committee. “Both new orders and production remain quite strong, indicating that the manufacturing sector is experiencing a much-needed recovery.”

Manufacturers’ order backlogs increased in January, a positive sign of future factory activity, ISM said. A sub-index measuring new orders declined to 71.1 percent in January from 73.1 in December, but the reading still indicates sustained, strong activity.

While many purchasing and supply managers tapped for the report indicated they are experiencing record sales and orders, others say their business has yet to experience a recovery.

“It is obvious that certain sectors are lagging the rest of manufacturing as we start the new year,” the ISM report said.

Of the 20 industries making up the sector, 17 reported growth, led by apparel, textiles, miscellaneous businesses including jewelry and toys; and chemicals.

An index measuring factory production rose to 71.1 in January, up from 69.2 in December. Meanwhile the group’s employment index settled at 52.9 in January, down slightly from 53.3 in December. That indicates continued growth in employment, but at a relatively modest pace.

“Both exports and imports remain strong based on this month’s data,” Ore said. “The weaker dollar is supportive of growth in exports, but it does not appear to be deterring imports into the U.S.”

Stocks were lower following the release of the report. In morning trading, the Dow Jones industrial average was down 26.22 to 10,461.85, while the Nasdaq composite index was down 6.13 to 2,060.02. The Standard & Poor’s 500 index was down 0.84 to 1,130.29.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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