US factories boom in January, inflation signs rise

Thursday, 3 February 2011 00:01 - - {{hitsCtrl.values.hits}}

NEW YORK, (Reuters) - The U.S. manufacturing sector grew at its fastest pace in nearly seven years in January and signs of inflation jumped more than expected as a recovery in the world’s biggest economy gained traction.

The Institute for Supply Management’s manufacturing survey released also showed employers were thinking about ramping up hiring, one of the weak spots of the recovery so far, and helped push U.S. stock prices to their highest since June 2008.

closely watched U.S. payrolls report is expected to show the economy added jobs for a fourth straight month in January but still not at the rate needed to make a big reduction in unemployment, The ISM manufacturing index, released as U.S. corporations announced strong profits and sales, hit 60.8 in January, the highest reading since May 2004 and well above analysts’ expectations. A reading above 50 indicates growth.

“All in all, the ISM report showed the trend in manufacturing output growth (and hiring) rising solidly at the beginning of 2011,” economists at UBS Investment Research said in a note to clients, adding the economy was gaining speed.

The new orders component, an indicator of future growth, jumped to 67.8 from 62.0.

The index’s employment component reached its highest since April 1973, although that will not necessarily equate to higher levels of hiring in the near term.

“I still would caution that the employment number is more about the willingness to hire, rather than an increase in the absolute numbers,” said Norbert Ore, chair of the ISM manufacturing business survey committee in Atlanta, Georgia.