WASHINGTON — U.S. manufacturing grew slightly last month, and factory hiring increased. Economists said the modest gain suggests that the economy entered the new year with some momentum.
The Institute for Supply Management said Wednesday that its index of manufacturing activity rose in December to 50.7. That’s up from a reading of 49.5 in November, which was the lowest reading since July 2009, one month after the recession ended.
A reading above 50 indicates growth, while a reading below signals contraction. The Institute for Supply Management is a trade group of purchasing managers.
“We finished the year on an uptick, but there isn’t a firm rebirth of confidence on the part of businesses,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, N.C. “We could face a little bit of a bumpy period before turning to slow growth in manufacturing.”
A measure of employment in the Institute for Supply Management report increased last month to 52.7. That’s up from 48.4 in November, which was the first time the employment gauge had fallen below 50 in three years.
Factories had cut jobs in three of the four months through November, according to government data. The jump in employment in the Institute for Supply Management survey suggests manufacturers may have stepped up hiring last month.
The Labor Department is to release the December jobs report Friday.
Still, a gauge of new orders was unchanged and production grew more slowly, the survey found. Manufacturers also cut back on stockpiles, a sign of concern about future demand.
“The trend in manufacturing remains weak,” Jim O’Sullivan, an economist at High Frequency Economics, said in a note to clients.
The closely watched manufacturing survey was completed before Congress reached a deal to avoid the “fiscal cliff.”
The last-minute deal that passed Tuesday averts widespread tax increases and delays deep spending cuts that had threatened to push the country back into recession. Still, most Americans will see some increase in taxes this year, which will likely slow consumer spending.
A gauge of export orders rose above 50 for the first time in six months, according to the Institute for Supply Management survey. That’s a hopeful sign that overseas economies are improving, raising demand for U.S. goods.
A survey in China on Monday found that manufacturing activity in that country expanded for the third straight month. That adds to evidence that its economy is improving after a slowdown last year.
Growth in the U.S. economy is being driven by other sectors, such as housing. A Commerce Department report Wednesday showed that overall construction spending slipped 0.3 percent in November because of a sharp drop in federal government projects. Spending on commercial buildings, such as office buildings and shopping malls, also fell.
Total spending on construction declined to a seasonally adjusted annual rate of $866 billion. That is 16.1 percent above a 12-year low hit in February 2011. Even with the gain, the level of spending remained only about half of what’s considered healthy.
The November figures were dragged lower by a 5.5 percentdecline in spending on federal government projects. Federal spending fluctuates sharply from month to month. In October, it rose 9.7 percent.
Spending on residential construction, however, has steadily increased over the past eight months and rose 0.4 percent in November.
“There’s good, solid momentum ... in the residential sector,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “We now have a construction sector that’s a modest contributor to [gross domestic product] rather than a drag. This is a very gradually healing story, not a boom story.”
Paul Ashworth, chief U.S. economist for Capital Economics, said the decline in construction spending was “nothing too much to worry about.”
“The recent surge in housing starts suggests that residential construction spending will expand at a fairly rapid pace this year, particularly when Hurricane Sandy rebuilding is added in,” Ashworth said.
There have been some positive signs for factory output. In November, companies substantially increased their orders for a category of large equipment that reflects their investment plans. That followed a big increase in the same category inOctober.
The economy grew at a 3.1 percent annual rate in the July-September quarter, much better than the 1.3 percent pace in the April-June quarter. But economists expect slowed growth in the final three months of last year, partly because of the uncertainties surrounding the fiscal cliff, to below a 2 percent pace.
Information for this article was contributed by Christopher S. Rugaber and Martin Crutsinger of The Associated Press; and Lorraine Woellert, Chris Middleton and Shobhana Chandra of Bloomberg News.
Business, Pages 21 on 01/03/2013