American manufacturing turned in best month in 20 years

NEW YORK -- The nation's manufacturing sector finished 2003 with its most robust month of growth in 20 years.

The Institute for Supply Management reported Friday that its manufacturing index jumped to 66.2 in December from 62.8 the previous month, strong evidence that the economic turnaround continues to pick up steam.

The new reading was the highest since December 1983 for a sector that has shed millions of jobs over the past three years.

Stocks rose strongly following the release of the report, but major indexes ended up mixed after a bout of late-day selling.

The Dow Jones industrial average ended 44 points lower at 10,410. Broader stock indicators were mixed. The Standard & Poor's 500 index fell 3 points to 1,108, while the Nasdaq composite index was up 3 points at 2,007.

The December reading marks the sixth consecutive month of expansion in manufacturing and was significantly higher than the 61 forecast by analysts.

The index measures the rate of growth in U.S. manufacturing. A reading above 50 indicates expansion; one below 50 indicates manufacturing activity is contracting. From March through June, the manufacturing index was below 50.

Economists said the index shows that while the beleaguered factory sector still has much ground to make up, it is now firmly in recovery mode, helped along by low interest rates and a falling dollar that makes U.S.-produced goods cheaper overseas.

"Manufacturing is really the last piece of the puzzle that is falling in place to produce broad-based, sustained economic growth," said Sung Won Sohn, chief economist with Wells Fargo & Co. in Minneapolis.

The momentum is particularly evident in new orders to factories, said Norbert J. Ore, chairman of the institute's manufacturing business survey committee. The index of new orders reached its highest level since 1950, rising to 77.6 in December from 73.7 in November.

An index that measures factory production also climbed, to 73 from 68.3 in November. The index of factory employment rose to 55.5 from 51.

Of the 20 industries making up the sector, 17 reported growth, led by instruments and photographic equipment, leather and furniture. Two industries, paper and chemicals, did not see a pickup in their business.

The institute did not have enough responses from the last remaining industry, oil, to gauge growth.

Still, Sohn warned that job growth at factories will continue to be limited in the coming year, with manufacturing continuing to shift overseas.