Manufacturing activity expands robustly in April
Tuesday, May 02, 2006

NEW YORK - The manufacturing sector expanded smartly in April, with strength in production and employment boosting a closely watched index above analysts' expectations and to its highest level in six months.

The Institute for Supply Management, a trade group based in Tempe, Ariz., said Monday that its manufacturing index rose to 57.3 in April from 55.2 in March. Wall Street analysts had expected the index to be down slightly at 55.0.

The April results matched the 57.3 reading of last November.

A reading of 50 or more indicates expansion, while below 50 indicates contraction. The index has been reflecting manufacturing growth for 35 consecutive months.

In midday trading, the Dow Jones industrial average rose 43.54, or 0.4 percent, to 11,410.68.

Broader stock indicators were also higher. The Standard & Poor's 500 index advanced 2.97, or 0.2 percent, to 1,313.58, while the Nasdaq composite index was up 2.31, or 0.1 percent, at 2,324.88.

The April strength in the index indicated that the U.S. economy, which expanded at a 4.8 percent annual rate in the first quarter, may be continuing strong growth in the second period.

Norbert J. Ore, chair of ISM's survey committee, said in a statement accompanying the report that "production and employment showed significant strength" in April, leading to some inventory growth in anticipation of future production needs.

He added, however, that manufacturers "still have major concerns about the impact of higher prices for energy and industrial commodities."

Don Norman, economist for the Manufacturers Alliance/MAPI trade group in Washington, D.C., said the higher energy and commodity prices were due, in part, to greater demand from manufacturers worldwide.

"One reason commodities are up is manufacturing is expanding at a pretty healthy clip," not only in the United States but also in countries such as China and India, Norman said.

The index measuring production rose to 60.4 in April from 57.5 in March, while the employment index rose to 55.8 last month from 52.5 the month before.

"Inventories reversed a 12-month trend in April" as the inventories index rose to 51.3 from 58.7 in April and 49.6 in March.

Of the 20 manufacturing sectors tracked by ISM, 15 reported growth: miscellaneous manufacturing, primary metals, transportation and equipment, electronic components, fabricated metals, industrial and commercial equipment, wood and wood products, glass and stone, apparel, food, printing and publishing, instruments and photographic equipment, chemicals, furniture, and rubber and plastic products.

New orders were growing at a slower rate in April, with the index reading 57.6 last month after March's 58.4. The backlog of orders also slowed, to 57.0 in April from 59.5 in March.

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On the Net:

www.ism.ws

From the Tuesday, May 02, 2006 edition of the Augusta Chronicle
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