NEW YORK (CNN/Money) - U.S. manufacturing activity decelerated a bit in February, the nation's purchasing managers said Monday, missing Wall Street forecasts slightly.
The Institute for Supply Management (ISM) said its index of manufacturing activity fell to 61.4 last month from a revised 63.6 in January. Economists, on average, expected an ISM index of 62, according to Briefing.com.
A reading above 50 indicates expansion in manufacturing.
"This month, many respondents are particularly encouraged by the increased breadth of the recovery in manufacturing," Norbert Ore, chair of the ISM's Business Survey Committee, said in a statement.
U.S. stock prices rose after the reports, while Treasury bond prices were mixed.
For several months before, during and after the latest recession, the manufacturing sector was among the weakest aspects of the total U.S. economy. Of the 2.3-million non-farm payroll jobs that have disappeared since March 2001, most have been factory jobs, and many of those jobs are never coming back.
But various national and regional surveys have shown a strong rebound in manufacturing activity in recent months, driven in part by a surge in demand in the second half of 2003.
Though the ISM report slipped a bit in February, most economists still believed it showed the sector's recovery continued.
"Don't sweat it at all," said Joel Naroff, president and chief economist of Naroff Economic Advisors. "The level of activity remains robust and the details are quite good."
Growth in employment measure
The ISM's employment index jumped to 56.3 from 52.9 in January, the highest level since 59.1 in December 1987.
Unfortunately, the ISM employment index has been above 50 for four straight months, a level that should mean an increase in factory jobs, but non-farm factory payrolls have continued to shrink, according to the Labor Department.
The Labor Department is scheduled to report February unemployment and non-farm payroll growth on Friday. Economists, on average, expect unemployment to hold steady at 5.6 percent and for non-farm payrolls to add 125,000 jobs, according to Briefing.com.
Based on February's ISM employment index, many economists are now hoping that February will show the first gain in factory payrolls since July 2000.
"This raises the odds that manufacturing payrolls may finally break through on Friday and register a gain," said Steve Stanley, economist at RBS Greenwich Capital Markets.
ISM's new orders index fell to 66.4 in February from 71.1 in January. The group's export orders index dipped to 54.9 from 57.5.
ISM's price index surged to 81.5 in February from 75.5 in January, the highest level since February 1995. The production index dropped to 63.9 from 71.1 in January.
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