Tempe, AZ, January 4--The pace of growth at U.S. factories picked up in December, boosted by an increase in new orders and despite a decline in employment, a report showed on Monday.
The Institute for Supply Management said its index of national manufacturing activity rose to 58.6 in December from 57.8 in November.
Of the 20 industries tracked by the ISM, 14 reported growth in December, including the leather, furniture and food industries. Among the industries that saw no growth was fabricated metals.
The ISM index is closely watched by economists and the financial markets because it provides an early look at economic activity in the preceding period and has a long track record of corresponding to changes in the health of the nation's industrial core.
Economists were especially encouraged by the growth in new orders. The ISM's new-order index rose to 67.4 in December from 61.5 in November. It was the 20th consecutive month that the new-order index exceeded 50%. Growth was led by the furniture industry.
The ISM report indicated that new orders were greatly influenced by U.S. exports, which appear to be rising because of the dollar's decline. In the past 12 months, the dollar has declined about 7% against the euro and 5% against the yen, giving American producers a competitive advantage over European and Japanese producers in those markets.
The ISM's index for new export orders jumped to 60 last month from 54.7 the month before. Ore said, "As the dollar softened there was an immediate effect on export orders."
Economists say that December is typically a weak month for manufacturers' orders, so the health of the new-orders index is an indication that industrial production will see moderately strong growth for the first quarter of 2005.
The ISM's employment index showed a decline to 52.7 in December from 57.6 in November. Although the index remains above 50, it has dropped considerably from earlier months and indicates that manufacturers remain conservative in their hiring.
