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ISM Index: 21 Straight Months Of Manufacturing Growth

Mon, 05/02/2011 - 4:38am

WASHINGTON (AP) — Manufacturing activity probably increased in April for the 21st straight month, but at a slower pace than in March.

Economists forecast that the Institute for Supply Management's index of manufacturing activity will drop to 59.6 in April from 61.2 in the previous month. That would be the second straight drop, a sign the manufacturing sector is cooling off after expanding in February at the fastest rate in nearly seven years. A reading above 50 signals expansion.

Manufacturing has been growing at a healthy pace since the recession ended in June 2009. Factories have benefited from strong overseas demand for heavy machinery, computers and other goods. And U.S. automakers have rebounded, after General Motors and Chrysler declared bankruptcy nearly two years ago, partly due to stronger consumer spending in the U.S.

The latest sign of the sector's health came last week, when the Commerce Department reported that companies ordered more industrial machinery, computers, steel and other long-lasting goods for the third straight month.

Orders for durable goods, which last for three years or more, rose 2.5 percent in March, the department said, much better than February's 0.7 percent increase.

Still, the earthquake and tsunami in Japan may slow U.S. factories in April and the following months. The disasters have shut down factories in Japan and disrupted the production of auto parts, electronic components and other items. The lack of parts has forced many U.S. companies, particularly in the auto sector, to temporarily slow or shut down production.

Johnson Controls Inc., which makes auto parts and building climate control systems, said last week that revenue in the April-June quarter would likely fall by $500 million, to below $10 billion. The company blamed the decline on disruptions in automotive manufacturing around the world.

The rising cost of oil and other commodities is also squeezing many companies' profit margins. Ford Motor Co., which has seen only minimal disruptions from the earthquake in Japan, said last week that it expects the cost of steel and other raw materials to increase by $2 billion by the end of the year.

The Institute for Supply Management, a trade group of purchasing executives based in Tempe, Arizona, compiles its manufacturing index by surveying about 300 purchasing executives across the country.

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