Factories No Longer in Freefall Point to U.S. Services Gain
Now that manufacturing is finding a floor, the U.S. economy may get the much-needed pickup in services that will prevent the ceiling from caving in.
The factory slump that began more than a year ago and accelerated toward the end of 2015 showed signs of easing February, according to figures Tuesday from the Tempe, Arizona-based Institute for Supply Management. Gains in orders and production just about made up for sustained cutbacks in inventories.
Improving demand in the U.S. is helping overcome the hurdles of a strong dollar and weaker growth abroad that have hurt exports by American manufacturers, which account for about 12 percent of the economy. As a strengthening job market braces U.S. consumers, gains in household spending are likely to prop up the rest and keep the expansion that began in 2009 on track.
“Forming a base and getting to rebound is the first step in the manufacturing sector healing,” said Tom Simons, a money-market economist at Jefferies LLC in New York, who correctly forecast the improvement in the factory index. “It’s certainly encouraging to see the manufacturing start to turn it around because that suggests that services can do better at some point as well.”
The ISM’s factory index climbed to 49.5 last month, the highest since September, from 48.2 in January. While the reading was just shy of 50, the dividing line between contraction and expansion, February’s improvement corroborates other industry reports that suggest manufacturing is gaining traction.
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http://www.bloomberg.com/news/articles/2016-03-01/manufacturing-no-longer-in-freefall-signals-u-s-services-pickup