NEW YORK - A measure of U.S. manufacturing activity rose for the first time in 1½ years in February, as a rise in orders and increased production helped lift the bruised sector out of its slump. <br>
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The Tempe, Ariz.-based Institute for Supply Management, formerly known as the National Association of Purchasing Management, said its index of business activity rose to 54.7 in February from 49.9 January. Analysts had been expecting a reading above 50 for the first time since July 2000. <br>
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An index above 50 signifies expansion, while a figure below 50 shows contraction. <br>
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"It looks like the manufacturing side of the economy is finally back on its feet," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis. <br>
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The ISM measure is closely tracked by economists because it offers an early reading on the health of the manufacturing sector. The index is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. <br>
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Earlier Friday, the Commerce Department reported that consumer spending, which accounts for two-thirds of all economic activity in the United States, rose 0.4 percent in January. Americans' incomes, which includes wages, interest and government benefits, also edged up by 0.4 percent. <br>
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On Wall Street, stock investors reacted favorably to the news, sending key indexes higher. The Dow Jones industrial average climbed 172 points to 10,278 in midday, and the Nasdaq composite index rose 46 points to 1,777. <br>
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The latest batch of positive economic data offers further evidence that the recession, which officially began last March, might be near an end and could be the nation's mildest downturn ever, analysts said. <br>
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On Thursday the government reported that the U.S. economy, measured by the gross domestic product, expanded by a better-than-expected 1.4 percent rate during the final three months of last year. <br>
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But manufacturers have been the hardest hit by the downturn, and the February reading was welcome news for the battered sector, which began to contract long before the rest of the economy. <br>
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"Manufacturing has struggled and hopefully this signals the beginning of a strong recovery," said Norbert J. Ore, who oversees the monthly ISM report. <br>
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Of the 20 industries tracked by the ISM, 14 reported overall growth last month, he said. They were leather; wood and wood products; primary metals; fabricated metals; jewelry, toys, sporting goods, musical instruments; rubber and plastic products; tobacco; leather; chemicals; transportation and equipment; glass, stone and aggregate; food; industrial and commercial equipment and computers; electronic components and equipment and printing and publishing. <br>
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Despite the breadth of the improvement, economists were guarded about the staying power of the comeback. <br>
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"If you're going on the economic fundamentals, it's probably permanent," Thayer said. "But the political fundamentals around the world are still very shaky. Anything could happen with the environment we're in, especially with the terrorist threat lingering." <br>
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On the Net: http://www.ISM.ws <br>
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