Group Says U.S. Manufacturing Sector Expanded At Faster Pace In June

Monday, July 2nd 2007, 10:02 am

By: News On 6

NEW YORK (AP) _ The nation's factories, plants and utilities should continue picking up steam in coming months, a research group said Monday, suggesting hardy consumer spending and moderating inflation are boosting confidence among manufacturers.

The Institute for Supply Management said that its manufacturing index rose to 56 in June. The reading marked the fifth consecutive month of growth.

The reading was above the May reading of 55 and higher than the market expectation of 55.4.

A reading above 50 indicates growth while a reading below 50 indicates contraction.

New orders, production and employment powered growth, while inventories continued contraction.

Prices for raw materials _ including aluminum, chemicals, gasoline and steel _ continued rising, although at a more moderate pace than the previous month. The index for prices paid was 68 in June, down from 71 in May.

``It remains elevated, but it's not raising red flags,'' said Ryan Sweet, an economist with Moody's Economy.com.

Investors worried about inflation were closely watching for a spike in the prices manufacturers paid for raw materials. Federal Reserve officials say the biggest risk to the economy is if inflation fails to recede.

While the moderation in the latest prices paid index was encouraging, analysts say a trend hasn't been established that costs are under control.

The top performing industries in June were petroleum and coal products; chemical products; plastics and rubber products; food, beverage and tobacco products; nonmetallic mineral products; computer and electronic products; paper products; fabricated metal products; primary metals; miscellaneous manufacturing; textile mills; and machinery.

``Following a weak first quarter, the manufacturing sector rebounded in a strong fashion during the second quarter,'' said Norbert J. Ore, chair of ISM's survey committee.

The strength of the new orders and production suggests that growth appears sustainable throughout the third quarter, Ore said.

In midmorning trading, the Dow Jones industrial average rose 0.65 percent to 13,495.60.

Broader stock indicators also jumped. The Standard & Poor's 500 index was up 0.72 percent at 1,514.23, and the Nasdaq composite index was up 20.80, or 0.80 percent, at 2,624.03.