US manufacturing grew in February for the first time in 19 months, a sign the recession that began a year ago may have run its course.
The Institute for Supply Management's factory index rose to 54.7 last month from 49.9 in January. A reading above 50 signals expansion, and the last time the index exceeded that level was July 2000. An index of new orders was the highest since October 1994 and the production index rose to a two-year high.
"Industry by industry there is some sense that things are improving," said Ralph Larsen, chief executive officer of Johnson & Johnson, in an interview at the Business Council meeting in Boca Raton, Florida. "Orders are a little firmer. Inventories are being rebuilt. So there's just a bit of a crack of sunshine."
Stocks soared and the dollar rose as the report provided evidence manufacturing has recovered from a slump that began in August 2000 and dragged the rest of the economy into recession last year. Separate reports showing increases in consumer spending, personal incomes and construction added to the optimism.
"Manufacturing appears to be bottoming out and that's obviously good for the economy," said Richard Clarida, assistant Treasury secretary for economic policy, in an interview.
The Dow Jones Industrial Average rose 263 points, or 2.6 percent, to close at 10368.86. The NASDAQ Composite Index rose 71 points, or 4.1 percent, to close at 1,802.75. The US currency strengthened to US$0.8653 per euro from 86.93 yesterday. It has risen 2.8 percent against the euro and 1.2 percent against the yen this year on speculation the US would pull out of recession before Europe or Japan.
Treasury securities fell as the factory gains suggested to investors that Federal Reserve policy makers may start raising interest rates to keep the economy from overheating. The 4 7/8 percent note maturing in 2012 fell 3/4 point, pushing up its yield 10 basis points to 4.98 percent. A basis point equals 0.01 percentage point.
In the manufacturing survey, 14 out of 20 industries reported growth, the group said. The index of new orders rose to 62.8 from 55.3, and was the third straight month showing a majority of companies reported higher orders. Orders for goods sold for export grew for a second straight month, the first time that's happened since August-September 2000. The production index rose to 61.2 from 52.
"Finally, we're starting to see some production increases," said JT Battenberg, chairman and chief executive of Delphi Automotive Systems Corp, in an interview yesterday with Bloomberg Television. "We're looking for a good first quarter and for a good year as the industry comes back."
Delphi is the biggest auto-parts maker.
General Motors Corp, the largest US automaker, this week boosted first-quarter and full-year production estimates because US sales are higher than expected. Ford Motor Co yesterday reported increased demand for new cars and light trucks and said it would delay production cuts at five plants.
Businesses reduced their stockpiles of unsold goods in every month except January last year, paring them in the fourth quarter at an annual rate of US$120 billion. That drop was twice the previous record of US$61.9 billion set in the third quarter.
Some manufacturers continue to reduce inventories, today's report showed.
At the same time, General Motors and other factories are asking workers to put in overtime, evidence they aren't using new hires to fill demand. The employment index showed factories reduced payrolls in February for a 17th straight month.
Companies still have little ability to raise prices. The prices-paid index fell last month and has showed companies reporting lower prices for the past year.
The Tempe, Arizona, group surveys more than 400 companies in 20 industries, including clothing, printing, furniture and plastics. Manufacturing accounts for about one-sixth of the US economy.
Consumers' incomes and spending rose more than expected in January, a sign that demand for manufactured goods will increase in the months ahead. Incomes rose 0.4 percent last month, the largest gain in six months, and spending also increased 0.4 percent, the Commerce Department said. Analysts expected a 0.1 percent rise in incomes and a 0.3 percent gain in spending.
Strength of consumer spending has been responsible for the turnaround in manufacturing. Consumer spending grew at a 6 percent annual pace in the fourth quarter, the fastest since mid-1998, as no-interest loans caused auto sales to surge. Since then, consumer spending has fallen off less than expected.
Construction spending rose 1.5 percent in January, more than any other month in a year as work increased on homes and highways, the Commerce Department said.
A separate report from the University of Michigan showed consumer sentiment fell for the first time in five months in February, dropping to 90.7 for the month from 93 in January.
The decline in confidence may reflect questions about the security of retirement plans after revelations about deceptive accounting practices at Enron Corp, analysts said. The Standard & Poor's 500 Index on Jan. 29 posted its largest drop since September as investors expressed concern companies such as Tyco International Ltd and Williams Cos may have misstated profits.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last