Weak dollar boosts production

Associated Press

WASHINGTON

The nation’s manufacturing sector has expanded this year at the fastest pace in a quarter-century, boosted by a weak dollar that has made U.S. goods cheap overseas.

Strong factory production could help the economy rebound after experiencing weak growth in the first three months of this year. But the construction industry is struggling, and manufacturing won’t drive enough job growth by itself. Rising prices also are threatening many companies’ profit margins.

The Institute for Supply Management said Monday that manufacturing activity expanded in April for the 21st-straight month. Though the trade group’s index dipped to 60.4, it’s down only slightly from the previous two months. And February’s reading of 61.4 was the fastest expansion in nearly seven years. Any reading above 50 signals growth.

The index has topped 60 in every month this year, the best four-month stretch in 27 years, said David Resler, an economist at Nomura Securities.

Companies are buying more industrial machinery, heavy equipment and computers, spurring much of the growth in factory output. And consumers are buying more cars, helping the beleaguered U.S. auto industry recover after General Motors and Chrysler declared bankruptcy two years ago.

Another reason for the growth is the falling dollar. It has declined 8 percent in value this year against a basket of six other currencies. That helped fuel a 7.8 percent rise in exports in the first three months of this year. A weaker dollar makes U.S. goods cheaper overseas and imports more expensive in the U.S.

The manufacturing sector has expanded in every month but one since the recession ended in June 2009. Still, it represents only about 11 percent of U.S. economic activity and can do only so much to lift the broader economy.

The home-building industry is on pace to suffer the worst two years for new-home sales since the government began keeping records in 1963. The service sector is recovering at a sluggish pace. Consumers are spending more after getting a cut in Social Security payroll taxes, but most of the extra money is going toward higher priced gas and food.

Builders did break ground on more hotels, office buildings and factories in March, lifting U.S. construction spending for the first time in four months.