After slowing in November, U.S. manufacturing expanded at a faster rate through the final month of 2010, rising to a seven-month high and boosting the economic outlook for the start of the new year.

Although the pace of growth for the United States manufacturing sector slowed in November, it began accelerating again in December, boosting the outlook for the manufacturing recovery at the start of 2011 and improving prospects for the growth of the overall economy. As new orders and production continue to rise, better hiring conditions may soon occur.

“Manufacturing activity has expanded in every month since the recession ended a year and a half ago,” the Associated Press reports. “The big difference now is that the growth is being driven by higher sales and more confident consumers — not just businesses rebuilding the stockpiles that they slashed during the recession. Steady hiring is likely to follow.”

According to the Institute for Supply Management’s latest manufacturing Report on Business, released yesterday, U.S. manufacturing expanded for the 17th consecutive month in December, as did the overall economy, which grew for the 20th month straight.

The ISM’s purchasing managers’ index (PMI), a key monthly gauge of the factory sector, rose to 57 in December, the highest level since May 2010. Readings above 50 indicate growth. Up from the 56.6 reading in November, the 0.4-point gain in December indicates that the manufacturing sector is expanding at a faster monthly rate. December’s PMI was just under the 12-month average of 57.3.

The ISM’s new orders index experienced a major boost last month, increasing from 56.6 in November to 60.9. Meanwhile, production grew from 55 to 60.7 and prices rose from 69.5 to 72.5. However, the employment index declined from 57.5 to 55.7, supplier deliveries dropped from 57.2 to 55.9 and inventories fell from 56.7 to 51.8.

“We saw significant recovery for much of the U.S. manufacturing sector in 2010. The recovery centered on strength in autos, metals, food, machinery, computers and electronics, while those industries tied primarily to housing continue to struggle,” according to Norbert J. Ore, chair of ISM’s Manufacturing Business Survey Committee. “Additionally, manufacturers that export have benefited from both global demand and the weaker dollar. December’s strong readings in new orders and production, combined with positive comments from the panel, should create momentum as we go into the first quarter of 2011.”

Eleven of the 18 industries tracked by ISM reported growth last month: apparel and leather; primary metals; fabricated metal products; machinery; computer and electronic products; food, beverage and tobacco products; textile mills; plastics and rubber products; transportation equipment; electrical equipment and appliances; and chemical products.

Many of the gains in December are attributed to increases in consumer spending through the holiday season, which typically drives demand for the production of electronic goods, computers and appliances, while spurring more investment in new machinery.

Conditions in international markets are another major source of growth for the manufacturing sector, as the global trading environment, coupled with currency fluctuations, has boosted the competitiveness of U.S. manufacturing.

“American manufacturers were also benefiting from changes in world markets,” the New York Times reports. “Global demand, especially in Europe and Asia, and a weaker dollar helped American exporters, while Asian manufacturing growth put upward pressure on commodity prices that was reflected in higher producer prices in the United States.”

These improvements in manufacturing indicators are likely to boost the country’s broader economic prospects and may help with hiring, as “history shows that U.S. gross domestic product tracks closely with the ISM index. The U.S. would likely grow more than 5 percent in 2011 if the ISM index averaged December’s 57.0 percent level over a full year,” according to MarketWatch. “Such a level of growth — or anything close to it — would almost certainly slash the nation’s 9.8 percent unemployment rate.”

Earlier

Manufacturing Growth Cools to a Moderate Rate

Manufacturing Expands for 10th Straight Month

Resources

Factory Outlook Bright After 17 Months of Growth
by Christopher S. Rugaber
The Associated Press, Jan. 3, 2011

December 2010 Manufacturing ISM Report on Business
Institute for Supply Management, Jan. 3, 2011

Manufacturing Grew in December, but Housing Sector Struggled
by Christine Hauser
The New York Times, Jan. 3, 2011

Manufacturing Grows Faster in December
by Jeffry Bartash
MarketWatch, Jan. 3, 2011