U.S. Manufacturing Growth Accelerates

For the first time in six months, U.S. manufacturing has grown substantially from more new orders

US Manufacturing - Cautiously Optimistic

being placed and more employees being put to work.

The increase in factory activity indicates the economy may be beginning to grow again after dwindling for the first three months of the year. Yet, overall growth remains slow, due to a multitude of factors. Americans have been unwilling to spend, even though there is more work and even low gas prices allowing more flexibility to spend.

The value of the dollar increasing acutely has made U.S. goods more expensive overseas, decreasing exports. Economists predict the economy may grow at a 2 percent annual pace in the April-June quarter, after a 0.7 percent decline in the first three months of the year.

With the end of a labor dispute at West Coast ports, manufacturers have benefited from parts and raw materials flowing more freely.

Signs also point to the stabilizing of overseas economies. China's manufacturing sector expanded last month, although not very rapidly, reported by an official manufacturing index. Manufacturing in the European Union has also picked up.

U.S. export orders did not see any rise or fall last month, after increasing in April. This is still preferred to the three months of the first quarter when export orders were receding.

Fourteen industries reported growth last month, including clothing, furniture, paper products and food and beverages. Two industries reported contraction: textile mills and computers and electronics.

The dramatic drop in the price of oil, from $110 a barrel last June to less than $50 in January, has caused drilling companies to cut back heavily on digging and building new wells. These cut backs have drastically reduced the demand for steel pipe and other equipment.

Business spending on buildings and equipment dropped 2.8 percent in the first quarter, the largest drop in more than five years. Despite all of this, there are signs that businesses, specifically those outside oil and gas, are spending more on expensive items such as machinery.