Sector is rare bright spot

August 3, 2010 at 12:00a.m.

US manufacturing

Associated Press

WASHINGTON

It’s a rare bright spot in an otherwise troubled economy: The nation’s manufacturing sector now has grown for a solid year, and more of its companies say they’re ready to hire.

Chip maker Texas Instruments says its business has recovered to pre-recession levels. Intel, which makes semiconductors, posted its best quarterly profit in a decade. And chemical giant DuPont says its sales volume is up and recently raised its prices.

The Institute for Supply Management said Monday its manufacturing index slipped in July, to 55.5 from 56.2 in June. But it was the 12th-straight month of readings above 50, which indicates expansion. At the depths of the recession, the index was closer to 30.

“Yes, the pace eased back a touch, but it was nothing to be worried about,” said Joel Naroff, president and chief economist for Naroff Economic Advisors.

Measures of production and new orders, which signal future business, both grew again, although more slowly than in June. And more manufacturers said they were willing to hire people.

The report, which comes out on the first business day of the month, surveys production managers at about 400 companies around the country, makers of products ranging from furniture and computers to food and tobacco.

Manufacturing growth has cooled for the past three months, but most of that was expected. The industry experienced strong growth last year because companies were replenishing their stockroom shelves after the recession.

Manufacturing accounts for about a fifth of U.S. economic activity, so it can’t carry the recovery on its own. But at a time when the housing market, consumer spending and other sectors of the economy are limping along, any sustained growth is welcome news.

The Dow Jones industrials surged 208 points to their highest level since May.

The service sector, which employs 80 percent of Americans, has lagged as high unemployment has made people nervous about spending money, especially for things such as meals out and vacations.

The housing market has struggled since a tax credits for homebuyers expired in April, a point confirmed Monday by a separate report that showed construction spending edging up slightly in June, with all the strength coming from government building.

The government reported last week that total economic growth slowed to a rate of 2.4 percent this spring, down from 3.7 percent growth in the first quarter and 5 percent at the end of last year.

In a speech Monday in South Carolina, Federal Reserve Chairman Ben Bernanke said the nation faces a long road back to good economic health. He noted the worst of the financial crisis is behind the nation, and the economy is growing again.

“But we have a considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings,” Bernanke said in a speech to an annual meeting of Southern lawmakers in Charleston.