Manufacturing index may point to recovery

The U.S. National Association of Purchasing Management posted its biggest gain in five years in August, and analysts are suggesting this may point to a recovery in the U.S. economy, reports the Financial Post.

The NAPM saw its monthly manufacturing index rise to 47.9 in August from 43.6 in July, beating economists’ forecasts for 43.9 and its best showing since November, 2000. The rise was the largest since June 1996.

The turnaround, say some economists, reflects companies’ success in lowering excess inventory, as well as lower interest rates and energy prices.

The NAPM index hit a ten-year low 41.2 in January and has been climbing ever since. However, it remains below the 50 mark that indicates the sector, which represents one-sixth of the entire U.S. economy, is in recession, where it has been stuck for the past 13 months.

“Both production and new orders made marked improvement and recorded impressive growth after a lengthy decline, providing encouragement that a number of industries are starting to recover,” said Norbert Ore, chairman of NAPM’s business survey committee.

The new orders index, a pointer to demand for factory goods in the pipeline, rose to 53.1 in August from 46.3 in July. The production index also crossed the 50 barrier and inventories rose, suggesting firms have begun to restock their shelves.