New York – For the fourth month in a row, the nation’s factories, plants, mines and utilities, among others, have been humming along, overcoming rising prices for food and fuel that have helped drag down the rest of the economy.
The Institute for Supply Management said today that its manufacturing index rose in May to its highest level in a year, providing hope that the economy will continue to expand despite a housing slump and rising gas prices.
The index registered 55, above the April reading of 54.7 and higher than the market expectation of 54. It hit 54.7 in May 2006.
A reading above 50 indicates growth while a reading below 50 indicates contraction.
Manufacturers are ramping up production to make up for caution early in the year, said Brian Bethune, an economist with Global Insight.
“They were pessimistic early in the year, and inventory levels got too low. What we’re seeing now is the classic whipsaw effect,” he said.
The report showed manufacturers were nevertheless in their tenth consecutive month of inventory reduction, reflecting ongoing caution. Rising prices across all commodities surveyed including aluminum, copper, gasoline, petroleum-based products and steel also increased worries about inflation.
Despite that, Wall Street liked the signs of strength in manufacturing, which boosted its conviction that the economy would keep growing.
In late morning trading, the Dow Jones industrial average rose 60.22, or 0.44 percent, to 13,687.86, sending the blue chips further into record territory.
Broader stock indicators also gained. The Standard & Poor’s 500 index rose 8.82, or 0.58 percent, to 1,539.44, also moving into record territory. The S&P moved near its record trading high 1,552.87, set in March 2000. On Wednesday, the S&P set a new record close for the first time in seven years.
The technology-heavy Nasdaq composite index rose today, advancing 18.57, or 0.71 percent, to 2,623.09.
On Thursday, the market’s confidence took a slight hit after the government reported that the nation’s gross domestic product, which measures the total value of U.S. goods and services, almost stalled in the first quarter.
The Commerce Department said GDP was 0.6 percent from January through March, its worst three-month showing in over four years.
Analysts blamed concerns over gas prices and a bloated trade deficit.
But manufacturing and a healthy job market have helped keep consumers optimistic. Spending by American households has been a driving force of the U.S. and the world economy.
