The nation’s manufacturing sector expanded strongly in December, its most robust month in two decades, in a sign that the economic recovery continues to gain ground.
The Institute for Supply Management reported Friday that its manufacturing index jumped to 66.2 from 62.8 in November.
The new figure was the highest since December 1983 for a sector that was one of the hardest hit in the economic downturn. The reading, which marks the sixth consecutive month of expansion in manufacturing, was significantly higher than the 61 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.
Economists said the index shows the beleaguered factory sector is now firmly in recovery mode, helped along by low interest rates and a falling dollar that make U.S.-produced goods cheaper overseas.
“Manufacturing is really the last piece of the puzzle that is falling in place to produce broad-based, sustained economic growth,” said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis.
The momentum is particularly evident in new orders to factories, said Norbert J. Ore, chairman of the institute’s manufacturing business survey committee. A component index tracking new orders reached its highest level since 1950, rising to 77.6 in December from 73.7 in November, he said.
“The strength in December’s data provides significant encouragement for prospects in the first quarter of 2004,” Ore said.
An index measuring factory production also rose, to 73 from 68.3 in November. ISM’s measure of factory employment rose to 55.5 from 51.
Of the 20 industries making up the sector, 17 reported growth, led by instruments and photographic equipment, leather and furniture.
“The month-over-month growth from November to December indicates a rapid recovery taking place in the sector, though there are still some businesses lagging and wondering when they will see the improvement that others are experiencing,” Ore said.
But economist Sohn noted that the growth comes in a sector that remains far from what it was a few years ago, with millions of jobs lost. Job growth at factories will continue to be limited in the coming year, with manufacturing continuing to shift overseas, he said.