- The Washington Times - Tuesday, January 4, 2005

ASSOCIATED PRESS

America’s factories saw orders go up by a strong 1.2 percent in November, the biggest advance in four months and a sign that the nation’s manufacturing sector was gaining momentum as the new year loomed.

The latest snapshot of manufacturing activity, released by the Commerce Department yesterday, was even better than the 0.8 percent rise some economists were forecasting. The 1.2 percent increase, the most since July, followed a solid 0.9 percent gain in October.

Yesterday’s report, along with one released on Monday, suggested the industrial sector — hardest hit by the 2001 recession — continues to gain ground and cement its recovery.

The Institute for Supply Management reported Monday that manufacturing activity grew solidly in December, ending 2004 on a high note.

“No one can dispute the fact that manufacturing enjoyed a very good year in 2004,” said Ken Mayland, president of ClearView Economics.

On Wall Street, though, the newest manufacturing report failed to inspire investors. The Dow Jones industrials fell 98.65 points yesterday to close at 10,630.78, and the Nasdaq fell 44.29 points to 2,107.86.

Yesterday’s report showed that orders for big-ticket manufactured goods in November rose by 1.4 percent, a turnaround from the 1 percent drop registered in October.

Orders for automobiles, household appliances, computers and primary metals, including steel, all showed gains in November.

Orders for nondurable goods, meanwhile, rose by 1 percent in November, following a 3.1 percent increase in the previous month. November’s good showing in nondurable bookings reflected increases in orders for food products, chemicals and paper products.

Encouraged by the economy’s performance, Federal Reserve policy-makers boosted short-term interest rates five times in 2004.

Economists believe rates probably will go up again when the Fed meets next in early February. The rate-raising campaign is geared to move rates, which had been extraordinarily low, to a more normal level now that the economic recovery is more firmly rooted. That should also help to keep inflation at bay.

Even with the manufacturing sector in recovery mode, economists are concerned that the sector may continue to be hit with job cuts.

Competition from a flood of imported goods flowing into the United States, along with high costs for energy and some raw materials, are a strain on some manufacturers, who may opt to shed workers to keep costs under control, some analysts say.

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