U.S. Manufacturing Rose More Than Expected in January

Manufacturing in the U.S. unexpectedly accelerated in January at the fastest pace in more than six years, reinforcing forecasts the economic recovery will strengthen in 2011.

The Institute for Supply Management’s factory index rose to 60.8, exceeding the most optimistic forecast in a Bloomberg News survey of economists and the highest level since May 2004, figures from the Tempe, Arizona-based group showed today. Readings greater than 50 signal growth.

Stocks rose, extending a global rally, as factory reports from China to Europe bolstered the outlook for American companies like Caterpillar Inc. The ISM’s employment gauge climbed to the highest level since 1973, indicating manufacturers may be more willing to hire as sales pick up.

“Businesses have figured out the economic recovery has legs so they’re growing more confident about expanding production and new orders and increasing hiring,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Manufacturing is making a very decent contribution to growth.”

The Standard & Poor’s 500 Index gained for the seventh day in the last eight, rising 1.3 percent to 1,302.99 at 11:40 a.m. in New York. The yield on the benchmark 10-year note increased to 3.44 percent from 3.37 percent late yesterday.

Estimates for the factory index in the Bloomberg survey of 78 economists ranged from 56 to 59.5.

Figures from the Commerce Department showed housing remains the economy’s weakest link. Construction spending in December fell 2.5 percent, the biggest drop since July, bringing the value of all projects to the lowest level in a decade.