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U.S. Manufacturing Index Drops To 52.4 But Indicates Continued Growth

U.S. Manufacturing Index Drops To 52.4 But Indicates Continued Growth
3/1/2012 10:36 AM ET

While the Institute for Supply Management released a report on Thursday showing that activity in the U.S. manufacturing sector expanded for the thirty-first consecutive month in February, the pace of growth in the sector unexpectedly slowed.

The ISM said its index of activity in the manufacturing sector dropped to 52.4 in February from 54.1 in January, although a reading above 50 indicates continued growth in the sector. The drop surprised economists, who had expected the index to inch up to a reading of 54.6.

The unexpected pullback by the manufacturing index came after it reached a seven-month high in the previous month.

Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "As was the case in January, new orders, production and employment all grew in February — although at somewhat slower rates than in January."

The report showed that the new orders index dropped to 54.9 in February from 57.6 in January, while the production index edged down to 55.3 from 55.7.

The employment index also slipped to 53.2 in February from 54.3 in January, although it still indicated the twenty-ninth straight month of job growth in the manufacturing sector.

The report also showed that the inventories index came in at 49.5 in February, unchanged from the previous month and continuing to suggest a modest contraction.

On the inflation front, the ISM said its prices index jumped to 61.5 in February from 55.5 in January, pointing to an acceleration in the pace of price growth.

James Knightley, senior economist at ING, said, "Given the better tone to confidence, employment and the regional manufacturing numbers we believe today's outcome is a temporary setback and we will get a rise again next month."

"However there is a threat from the recent run up in oil prices, which needs to be watched carefully," Knightley added.

Next Monday, the ISM is due to release a separate report on activity in the service sector in the month of February. The service sector index came in at an eleven-month high of 56.8 in January, up from 53.0 in the previous month.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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