Manufacturing in the U.S. expanded in May for a 10th month as factories boosted payrolls to keep up with rising sales here and abroad.

The Institute for Supply Management’s manufacturing gauge fell less than forecast to 59.7 from 60.4 in April, which was the highest level in almost six years. Readings greater than 50 point to expansion. The group’s export index climbed to the highest level in two decades.

Companies including Deere & Co. are seeing orders increase as U.S. and overseas customers update equipment and rebuild inventories. Manufacturing growth and consumer spending may be strong enough to help the world’s largest economy weather any effects from the European debt crisis.

“Manufacturing is still doing very well,” Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio, said before the report. “Fundamentally, confidence has come back to the consumer and so consumer spending is increasing moderately, We’re seeing strong rebounds from capital spending on equipment and exports, and the third factor is inventory stocking.”

Stocks rebounded from earlier losses after the report showed manufacturing continued to propel the economic recovery. The Standard & Poor’s 500 Index rose 0.2 percent to 1,091.11 at 10:23 a.m. in New York. Treasury securities trimmed gains, leaving the yield on the benchmark 10-year note at 3.29 percent, the same as late yesterday.

Home Building

Other reports today showed manufacturing growth from China to the euro region weakened in May. The Purchasing Managers’ Index for China fell to 53.9 in May from 55.7 in the previous month, the Federation of Logistics and Purchasing said. A separate index released by HSBC Holdings Plc and Markit Economics fell to the lowest level in a year.

A gauge of manufacturing in the 16-member euro region declined to 55.8 from 57.6 the previous month, London-based Markit Economics said. That’s below an initial estimate of 55.9 released on May 21.

Production, Orders

The ISM’s production index eased to 66.6 from 66.9, the highest since January 2004. The new orders measure was unchanged at 65.7.

The employment gauge climbed to 59.8, the highest level since May 2004. The measure of export orders increased to 62, the highest since December 1988.

The measure of orders waiting to be filled rose to 59.5 from 57.5. The index of prices paid fell to 77.5 from 78.

The inventory index decreased to 45.6 from 49.4 in April. A figure lower than 50 means manufacturers are cutting stockpiles.

Manufacturing has been a leader in the economic recovery as demand from abroad strengthened and firms picked up production and spending to meet demand after a record drawdown in inventories last year. Companies may spend a “considerable while longer” restocking goods, Deutsche Bank Securities economists Joseph LaVorgna and Carl Riccadonna said in a note to clients May 25.

Factory Jobs

Factories added 101,000 workers to payrolls in the first four months of the year, according to Labor Department data, marking the most successive gains since 2006. Manufacturing production climbed 6 percent in the 12 months to April, the biggest year-over-year gain in a decade, according to figures from the Federal Reserve.

One issue that may restrain manufacturing in coming months is the effect of the European debt crisis on U.S. trade. A stronger dollar along with the potential for slower demand from Europe may be a drag on U.S. exports.

3M Co., the maker of 55,000 products from Post-It notes to dental implants, continues to watch the situation in Europe though it has not seen any falloff in its business, Chief Financial Officer Patrick Campbell said May 18. The company expects a “similar level” of business in the second quarter as it had in the first, he said.

Europe’s Influence

“We are on track to a similar level of performance that we were in the first,” Campbell said during a webcast presentation at the Electrical Products Group conference in Longboat Key, Florida. “Thus far we have not really seen any change in our activity in Europe here as we’ve gone through the second quarter.”

Deere, the world’s largest farm equipment maker, on May 19 reported second-quarter profit that topped analysts’ estimates and raised earnings and sales forecasts for a second time this year. The company is benefitting from growing demand in the Americas for machinery such as tractors and signs of stabilization in U.S. construction-equipment markets.

“Our performance, no doubt, reflects some improvement in overall economic conditions,” spokeswoman Susan Karlis said on a conference call. “It certainly reflects strong demand for large farm machinery in the United States and other key markets.”

By Courtney Schlisserman

Tags: consumer spending, debt crisis, economic recovery, euro zone, european economy, financial, inventory, stock market, us consumer, us economy, us exporters, us manufactured

This entry was posted on Tuesday, June 1st, 2010 at 11:04 am and is filed under Debt, Global Economy, Global Financial, Market Finance, US Finance, World Financial, european economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.