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U.S. manufacturing expands for 7th straight month

Manufacturers increased production and employment in February, signaling factories are leading the nation out of recession as the new year begins.

The Institute for Supply Management's factory index fell to 56.5 from January's 58.4 - a five-year high, figures from the Tempe, Ariz.-based group showed. The measure exceeded 50, signaling expansion, for a seventh straight month. Manufacturing accounts for about 12 percent of the economy. The group's jobs gauge rose to the highest level since January 2005.

Combined with a report showing consumer spending in January climbed more than anticipated, the figures signaled the expansion that began late last year will be sustained into 2010. The need to rebuild inventories and invest in new equipment may keep factories hiring, prompting the rebound in employment to ripple through the rest of the world's largest economy.

"It's a business-led recovery," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in Manhattan. "Manufacturing is going to be a part of it . . . and you'll see it leak down" to other sectors, he said.

Consumer spending, which accounts for about 70 percent of the economy, rose 0.5 percent in January, the fourth straight gain, figures from the Commerce Department showed. Incomes rose 0.1 percent, the report also showed, less than anticipated and restrained by declines in interest and dividend payments. Wages and salaries climbed 0.4 percent, the most since April.

The group's employment index increased to 56.1 from 53.3. Manufacturers boosted payrolls by 11,000 workers in January, the first gain in three years, the Labor Department said last month.- Bloomberg News

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