U.S. factories boomed at close to a 20-year high in February, according to a survey released Monday that also suggested a turnaround in hiring may be on the horizon after a three-year struggle.
The Institute for Supply Management said its monthly manufacturing index fell to 61.4 in February from January’s two-decade high of 63.6, showing the ninth straight month of expansion in the sector that makes up less than a fifth of the U.S. economy.
Even though the index fell below the 62.0 level forecast by economists, the strength of the survey’s components gave a lift to stocks and hurt safe-haven U.S. Treasuries. A reading above 50 in the index shows expansion. All 20 industry sectors in the survey also showed expansion.
“It appears that the manufacturing sector has sustainable momentum at this point,” said Norbert Ore, ISM’s manufacturing survey director.
The other ISM indexes also showed manufacturers gaining enough confidence to hire workers and the outlook for future growth was bright, though a rapid rise in prices may be squeezing profits.
The employment index jumped to 56.3 in February -- the highest since December 1987 -- from January’s 52.9. ISM’s Ore said more and more factories were reporting hiring though it has yet to show up in government employment statistics.
Even as the ISM report and other regional surveys have shown a pick-up in jobs during the past two months, the government’s payrolls survey showed a 38,000 decline in manufacturing jobs nationwide.
Ore said there are “a lot of comments about people doing some hiring.” The February U.S. payrolls report will be released Friday and economists forecast a 125,000 rise.
Two things are worrying manufacturers, ISM said -- the rapid rise in energy prices and a growing shortage of steel.
The prices index jumped in February to 81.5, the highest since early 1995, from 75.5 and is up almost 20 points in the past four months. Rather than being inflationary, typically such a rapid rise in prices cuts profit margins at factories.
The ISM manufacturing report is based on monthly responses by purchasing executives at more than 400 industrial companies, from textiles and chemicals to paper and computers.
