U.S. manufacturing jumped in February

Washington, DC, United States (4E) – U.S. factory activity grew in February, the fastest expansion in almost two years, boosted by higher orders amid the prospects of cuts in federal government spending.

The Institute for Supply Management’s manufacturing purchasing managers’ index (PMI) climbed to 54.2 in February from 53.1 in January. The index is at its highest since June 2011.

The 50-mark separates between expansion and contraction. A survey by the Dow Jones Newswires shows that economists expected a decline of PMI to 52.5 in February from the previous month.

Despite the across-the-board budget cuts as a result of the failure by Washington to reach a deal on sequestration, the rebound in housing and household spending will continue to drive factory activity and grow the economy, which has stagnated in the final three months of 2012.

A Commerce Department report showed that personal spending rose in January even as incomes fell at its fastest rate in 20 years. Lower incomes, which fell 3.6 per cent, resulted to the lowest saving rate since November 2007.

Household spending rose by 0.2 per cent after inching up 0.1 per cent in the previous month. It accounts for around 70 per cent of the U.S. economy.

Data from regional Federal Reserve banks show mixed reading of factory activity last month. Some Fed banks said that manufacturers pulled back in February although others said there was stronger growth.

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