U.S. manufacturing activity rises in January

Reporting from Washington —  Activity at the nation’s manufacturers accelerated in January at the fastest pace since May 2004, according to a closely followed survey of top executives released Tuesday.

The Institute for Supply Management’s index rose to 60.8 in January from 58.5 in December.

It marked the 18th straight month of expansion in factory activity, as manufacturing continues to outperform other sectors of the U.S. economy.

The report was stronger than expected. The institute’s index had been expected to be unchanged, according to economists surveyed by MarketWatch.

“Overall, this is very, very strong,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Readings above 50 in the index indicate that more firms are growing than contracting. The institute tracks the breadth of growth across firms, asking purchasing managers whether business is better or worse in the most recent month compared with the prior one.

The nation’s economy, as measured by gross domestic product, accelerated at a 3.2% growth pace in the fourth quarter.

Norbert Ore, head of the institute’s survey committee, said the January report showed that manufacturing is carrying a lot of momentum into the first quarter.

Fourteen of 18 industries tracked by the Tempe, Ariz.-based institute were growing in January, led by petroleum, primary metals and apparel.

The institute’s new-orders index for January also jumped, reaching 67.8 from 62 in December, data showed. That is the highest since January 2004.

Production rose slightly, with the institute’s index climbing to 63.5 from 63.0 the prior month.

There was good news on the jobs front as well, as the employment index improved to 61.7 from 58.9 in December. This is the highest level since April 1973.

On Friday, the government will report on nonfarm payrolls and the nation’s unemployment rate for January.

Economists surveyed by MarketWatch are looking for payrolls to rise 140,000 after having added 103,000 jobs in December. The jobless rate is projected to tick up to 9.5% from 9.4% in December.

In a separate report, the Commerce Department said U.S. construction spending fell 2.5% in December.

Robb writes for MarketWatch.com/McClatchy.