BUSINESS FACTORS

World’s Factories Pick Up the Pace

The U.S. manufacturing sector expanded in January and indicators of future activity pointed to continued growth in the months ahead.

Meantime, separate gauges of manufacturing around the globe firmed up despite the threat of recession in Europe and a recent cooling of Asian economies.

Manufacturing activity in the euro zone, though still contracting, was slightly less negative, while both government and private-sector gauges showed China’s factory sector accelerated over the month.

In the U.S., the Institute for Supply Management’s index of overall activity rose one point to 54.1 in January from a month earlier. That was roughly in line with economists’ expectations, despite changes in how the ISM smooths out seasonal variations in the index. Readings above 50 indicate growth.

Backlogs increased and a measure of new orders—a predictor of future activity—rose 2.8 points to 57.6, the highest level since April. “I expect a year that’s better than 2011,” said Bradley Holcomb, chairman of the ISM’s manufacturing survey panel.

U.S. manufacturing has outpaced the broader economy since the recovery started in the second half of 2009. Manufacturers have disproportionately benefited from a recent jump in business investment. They also gain by from selling goods to developing-world economies that, even when cooling, continue to grow at several times the rate of the U.S. So far, manufacturers around the globe have remained similarly resilient.

A government gauge of China’s manufacturing sector rose to 50.5 in January from 50.3 in December—a modest rise, but indicative of a faint acceleration in growth. That has helped assuage fears that China’s economy could have a hard landing from its cooling property bubble.

Europe’s manufacturing sector has taken a harder hit. While in Germany, Europe’s biggest economy, manufacturing activity expanded for the first time since September, France, Italy, Spain, Greece and Ireland all weakened.

A report showed the January rebound in German manufacturing helped to slow a six-month contraction in euro-zone factory activity. Markit Economics, a data company, said its index for the German manufacturing sector rose to 48.8 in January from 46.9 in December.

Though the sector still contracted in the 17-country currency bloc, the German improvement suggests the euro zone stabilized in January.

Many economists think it will be hard for U.S. manufacturers to keep expanding at their current pace. An overall slowdown in the global economy “will eventually weigh on manufacturing activity in the U.S.,” said Ted Wieseman, an economist at Morgan Stanley.

Source: Excerpted from The Wall Street Journal