By Bob Willis Feb. 1 (Bloomberg) -- Manufacturing probably expanded in January for a sixth consecutive month, spearheading the recovery from the worst recession since the 1930s, economists said before a report today. The Institute for Supply Management’s factory index rose to 55.5 from a December reading of 54.9, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Other reports may show personal spending rose and construction fell. Factories are stepping up production as stimulus-fueled gains in demand and record cutbacks in inventory boost orders. After the loss of 7.2 million jobs in the last two years, some companies such as Ford Motor Co. are beginning to hire again, laying the groundwork for sustained gains in spending. “With pent-up demand coming forward, factories have to quickly snap back into shape to meet that increased demand,” said Ellen Zentner, a senior economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. “We are on the cusp of creating jobs in manufacturing.” The Tempe, Arizona-based purchasing managers’ report is due at 10 a.m. New York time. Survey forecasts ranged from 53.5 to 58. The group issued its annual revisions last week that may not be reflected in this month’s median forecast. The factory index was previously reported at 55.9 for December. Fastest Pace U.K. manufacturing expanded at the fastest pace in 15 years in January as a weak pound boosted exports, the Chartered Institute of Purchasing and Supply and Markit Economics said today in London. Growth in the 16-nation euro region’s manufacturing industry accelerated more than initially estimated last month, separate data showed. Figures from the Commerce Department may show personal spending rose 0.3 percent in December after a 0.5 percent gain the prior month, according to the median estimate of economists surveyed by Bloomberg. Incomes probably increased 0.3 percent, according to the survey median before the 8:30 a.m. release. Government stimulus helped spark rebounds in the housing and automobile industries, two of the most depressed areas during the recession. Factories also benefited from increased orders after companies pared inventories last year by a record $125 billion. Efforts to rebuild depleted stockpiles contributed 3.4 percentage points to a fourth-quarter growth rate of 5.7 percent, the strongest in six years. Second Time Employers in January may have added jobs for the second time in three months. Economists surveyed by Bloomberg forecast a 13,000 gain in payrolls last month after a loss of 85,000 in December. The Labor Department will report the figure on Feb. 5. With the economy expanding, the Standard & Poor’s Supercomposite for industrial machinery is up 77 percent since reaching a six-year low on March 9, exceeding the 59 percent gain for the broader S&P 500 Index. Housing, the industry that triggered the recession, is struggling with mounting foreclosures that may push down prices and discourage building. A report from the Commerce Department at 10 a.m. may show construction spending fell 0.5 percent in December, the 14th decline in the last 15 months, according to the median forecast of economists surveyed. Production gains are starting to encourage the hiring needed to ensure the recovery is sustained. Chicago Plants Ford said Jan. 26 it will spend about $400 million and add 1,200 jobs at two Chicago plants to build a new, more fuel- efficient Explorer sport-utility vehicle. Caterpillar Inc., the world’s largest maker of earthmoving equipment, has recalled more than 500 workers and said Jan. 27 that higher production will require “selective” increases in employment. Economies in North America, Europe and Japan are improving and more rapid rebounds are occurring in China and most developing countries, the Peoria, Illinois-based company said. General Electric Co. is hiring workers in energy, health care and rail transportation, in part because governments’ economic-stimulus plans have helped lift demand. GE, whose power-plant equipment generates one-third of the world’s electricity, is bidding to supply new passenger locomotives for Amtrak and in November announced a joint venture in China that would make high-speed rail locomotives that may add 200 U.S. jobs. “We will create jobs in the United States that could not have been created any other way,” John Rice, chief executive officer of GE Technology Infrastructure, said of the rail programs in a Jan. 28 Bloomberg Television interview.

Source