Manufacturing growing at fastest pace in 7 years

Associated Press

WASHINGTON

U.S. manufacturers expanded at the fastest pace in nearly seven years last month, but a sudden rise in the price of raw materials could threaten their profits.

The Institute for Supply Management said Tuesday that its index of manufacturing activity rose to 61.4 in February, up from 60.8 the previous month. That’s the highest reading since it reached the same level in May 2004. The ISM’s index bottomed out at 33.3 in December 2008, its lowest point in nearly 30 years.

Any reading above 50 indicates expansion. The manufacturing sector has expanded for the past 19 months.

The rebound in manufacturing is gaining momentum, the report showed. The new-orders index rose to a seven-year high. A measure of order backlogs rose to its highest level in a year. And inventories are shrinking, both at manufacturers and their customers. All are signs that factory output is likely to keep growing.

Solid growth overseas, particularly in developing countries such as China, Brazil and India, also has helped by boosting exports.

But prices paid for steel, plastics, rubber and other raw materials rose for a third-straight month, a sign that increasing production costs could spark higher inflation.