NEW YORK – U.S. manufacturing chugged to a full year of expansion in May, pushing factory hiring to its highest in 31 years, a survey released Tuesday showed.
The Institute for Supply Management (search) said its index of national factory activity rose to 62.8 in May from 62.4 in April, compared with economists' forecasts for a fall to 62.0.
In January the index stood at a two-decade high of 63.6.
A reading above 50 points to growth.
All the signs point to growth staying strong ahead, with new orders, backlog of orders and production indexes all running at historically high levels.
But Norbert Ore (search), head of the ISM manufacturing survey committee, said such growth rates were probably unsustainable. Ore also said higher energy and natural gas prices could hurt the factory expansion's pace in the second half of the year.
"It's obviously a pretty good time for manufacturing. It makes one start to contemplate what's going to kick us off of this pedestal at this point," Ore said in a conference call after the data were released.
The yearlong stretch of strong growth helped power the ISM's employment index to 61.9 in May -- the highest since April 1973 -- from 57.8 the prior month. But after shedding nearly 3 million jobs over more than three years, the factory sector has a long way to go to recover all the jobs lost.
A persistent rise in prices paid by factories on everything from energy to commodities eased a bit in May but remains near its highest levels in almost 25 years. The prices index eased to 86.0 in May from 88.0 in April.
With the labor market recovering and price pressures building in the economy, economists widely believe the Federal Reserve will begin raising interest rates this month from a 46-year low of 1 percent, its first hike in four years.
"Right now, the economy is booming and clearly the Fed needs to tighten," said Jim O'Sullivan, senior economist at UBS Investment Bank (search) in Stamford, Conn.
The ISM index is compiled from monthly responses by purchasing executives at more than 400 industrial companies, ranging from textiles and chemicals to paper and computers.