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3/1/2016 10:40:00 AM Write a Letter to the Editor Write a letter to the Editor

Manufacturing Begins to Steady as New Orders Expand

Bradley C. Bower/Bloomberg News

Factory activity in February shrank less than forecast as gains in new orders and production provided signs that the beleaguered industry soon could stabilize.

The Institute for Supply Management’s index climbed to 49.5, the highest since September, from 48.2 in January, a report from the Tempe, Arizona-based group showed March 1.

While the reading was just shy of 50, the dividing line between contraction and expansion, last month’s improvement corroborates other industry reports that suggest the manufacturing slump may be easing.

Factories have been plagued by a steady stream of headwinds since mid-2014, including soft overseas markets, a strengthening dollar, weakness in the capital-intensive oil industry and a buildup in inventories that reduced the need for additional production. As those hurdles start to fade, factories also should find a source of strength in domestic demand, which is being boosted by consumers with solid job gains and a nascent pickup in wage growth.

“Perhaps we found bottom and a turning point,” Bradley Holcomb, chairman of the ISM’s factory survey, said in a conference call. “I think we’re set up for things in the right direction, and I say that largely on the basis of new orders.”

The median forecast of 77 economists surveyed by Bloomberg News called for 48.5. Estimates ranged from 47.2 to 51.

For the first time since August, at least half of the industries expanded in February, with nine of 18 showing growth. Makers of wood products, textiles, furniture and chemicals were among the top performers. The list of comments by respondents also skewed to the positive, with a purchaser at a chemical company highlighting the difference between solid demand in the United States and softer growth internationally.

The new orders gauge last month was 51.5, matching the January reading as the highest since August. The production measure climbed to 52.8, a six-month high, from 50.2.

The employment index increased to 48.5 from 45.9, indicating factories trimmed staff at a slower pace. The February jobs report comes out March 4.

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By Victoria Stilwell
Bloomberg News

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