Factory sector expands at fastest pace in 7 years 

WASHINGTON (AP) — America's factory sector expanded in January at the fastest pace in seven years, asmanufacturers reported a sharp jump in new orders.

The Institute for Supply Management, a private trade group, says its index of manufacturing activity rose last month to 60.8. The sector has expanded for 18 straight months of expansion, and January's reading was the highest since May 2004. Any reading above 50 indicates expansion.

The manufacturing sector bottomed out at 33.3 in December 2008, the lowest point since June 1980. It has helped drive growth since the recession ended in June 2009.

The employment index also rose, a sign that manufacturing companies are hiring more workers. And the prices paid index, which measures whether manufacturing companies are paying more for raw materials, jumped sharply.

WASHINGTON (AP) — Manufacturers likely increased their output in January for the 18th straight month, though at a slower pace than in December.

Economists expect the Institute for Supply Management's index of manufacturing activity will dip to 58 in January, from a revised 58.5 in December. Any reading above 50 indicates that manufacturers are growing.

The trade group of purchasing executives will release its report on Tuesday at 10 a.m. EST.

The manufacturing index reached 60.4 in March 2010, the highest point in nearly 6 years, as industrial output rose and helped the economy rebound. The index bottomed out at 33.3 in December 2008, the lowest point since June 1980.

A reading of 58, while lower than the previous month, would still signal solid growth at U.S. factories. Greater consumer spending on cars, household appliances and furniture, among other goods, has given manufacturersa boost. Manufacturers actually added 136,000 jobs last year, the first annual net employment gain for the sector since 1997.

Consumer spending rose 4.4 percent in the October-December quarter, the fastest pace in four years, the Commerce Department said last week. The economy grew at a 3.2 percent annual rate in that same period.

On Monday, a purchasing managers' index compiled by a trade group in Chicago jumped to a 23-year high, leading some economists to speculate that the national figure could come in better than expected. The Chicago index is based on a survey of companies in the Midwest, including both manufacturing and services firms. The survey asks for their views on the national economy.

Despite manufacturing's strength, economists don't expect the sector will do much to reduce the nation's 9.4 percent unemployment rate. Many factories have automated processes and taken other steps to enhance productivity. That enables them to increase output without hiring many more workers.

Many companies are also doing much of their hiring outside the United States. Caterpillar Inc. said last week that its October-December profit more than quadrupled to $968 million, or $1.47 per share. The heavy equipment maker added 19,000 new jobs last year, though only 7,500 were in the U.S. Caterpillar eliminated 37,000 positions during the recession.

Still, economists will monitor the report's employment index, which rose to 58.9 last month. Any number above 50 indicates that manufacturing companies are still hiring.

Analysts also will likely pay close attention to the prices paid index, which jumped to 72.5 in December. That indicates that manufacturing companies are paying more for raw materials, such as aluminum, steel, energy and other commodities. They may be forced to pass on the higher costs, which could lead to inflation. If they are forced to eat the higher costs, that would cut into profits.