Metalnewsnet 1 Mar :

Business activity in the U.S. expanded in February at the fastest pace since 2005, a private report showed.

The Institute for Supply Management-Chicago Inc. today said that its business barometer climbed to 62.6 from 61.5 last month. Readings greater than 50 signal expansion. Measures of prices paid and order backlogs increased, and the employment gauge showed growth for a second straight month.

Manufacturing, which accounts for about 12 percent of the U.S. economy, is helping lead the country out of recession as firms restock depleted inventories to meet demand. Caterpillar Inc. is among companies that are beginning to recall laid-off workers, setting the stage for stronger business and consumer spending in coming months.

“Now that businesses are more confident that the recovery will last, the cutbacks that looked prudent when sales were plummeting appear excessive,” Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “Manufacturing may exceed our expectations this quarter.”

Economists projected the Chicago index would drop to 59.7, based on the median estimate of 52 projections in the Bloomberg survey. Forecasts ranged from 55 to 64.3.

Orders

The group’s gauge of new orders dipped to 62.2 from 66.4 the prior month, while the index of order backlogs increased to 58.5 from 54.3.

The employment gauge fell to 53 from 59.8, marking the first back-to-back expansion since September 2007, three months before the U.S. recession started.

The index of production decreased to 65.2 from 66.6 the prior month, and the gauge of inventories fell to 42.4 from 48.7, showing an increasing pace of inventory drawdown.

A measure of prices paid for raw materials increased to 67.7, the highest level since September 2008, from 66.2.

Economists watch the Chicago index for an early reading on the outlook for U.S. manufacturing. The group says its membership includes both manufacturers and service providers, making the gauge a measure of overall growth. Its members have operations across the country as well as abroad.

A separate gauge of national manufacturing, the Tempe, Arizona-based Institute for Supply Management’s factory index, probably fell in February to 57.8 from 58.4 the previous month, according to a survey median. That report is due March 1.

Fourth Quarter

The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories, a Commerce Department report today showed.

Some manufacturing companies are adding to payrolls as demand increases. Caterpillar, the world’s largest maker of bulldozers and excavators, is recalling 100 workers at its large-engine center in Lafayette, Indiana, spokeswoman Bridget Young said in a Feb. 18 e-mail.

The Peoria, Illinois-based firm forecasts sales will increase as much as 25 percent this year and last month announced that it recalled more than 500 workers. “Caterpillar may be recalling or hiring employees in business units at various facilities this year based on demand fluctuation,” Young said.

(From Bloomberg)