WASHINGTON (AP) -- A private measure of the manufacturing sector's health for January rose from a record low, but still posted the 12th straight month of contraction amid a global recession.
The Institute for Supply Management, a trade group of purchasing executives, said Monday that its manufacturing index rose to 35.6 in January from an upwardly revised 32.9 in December. The January reading was above the 32.6 that economists surveyed by Thomson Reuters had expected.
Any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily since August as the economy deteriorated, hitting a 28-year low in December.
The report, which is based on a survey of members of the Tempe, Ariz.-based group, covers such indicators as new orders, production, employment, inventories, prices, and export and import orders.
While the increase in the index for January showed a significant improvement, "it is still a sign of continuing weakness in the (manufacturing) sector," Norbert Ore, chairman of the institute's manufacturing business survey committee, said in a statement. Executives surveyed said "that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper."
On a more positive note, Ore said the index continues to show significant deflation of the prices manufacturers must pay for materials, which ultimately should help consumers.
Still, the Commerce Department on Friday reported that the economy shrank at a 3.8 percent pace in the fourth quarter, the worst showing in a quarter-century.
The improvement last month in the manufacturing index is "unlikely to mark the start of a sustained trend," given that inventories are excessive in many industries and export demand is falling sharply, said Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York.
"Robust export demand had been the main support for U.S. manufacturing for many months," Shapiro wrote in a research note. "Now, with economic activity weakening sharply in many of the United States' main export markets, exports have begun to drop, with the pace of decline set to accelerate significantly in the months ahead."
As the recession that began in December 2007 persists, companies are cutting thousands of jobs. Heavy equipment maker Caterpillar Inc. announced more than 22,000 job cuts last week alone, and Starbucks Corp. said it would cut 7,000 jobs as it closes some of its stores.
Industries reporting growth in January, included textile mills, petroleum and coal products, according to the survey. Nonmetallic mineral products, electrical equipment, appliances, paper products, and plastics and rubber all contracted last month.
Executives in the apparel and leather industries said the slowdown in the automobile industry is forcing their suppliers to cut production and employment. Likewise, those in the chemical products industry reported they are seeing a "trickle down" effect on their manufacturing, which is tied to the automotive industry.