The U.S. economy has found an unexpected bright spot: manufacturing.
Aided by a rebound in European and Asian economies, a depreciating U.S. dollar that makes exports more attractive and record low inventories, the country's factory sector is slowly returning to life, and has become an unlikely, if unreliable, standard bearer for the nascent U.S. recovery - even in the long-blighted Northeast.
Autos are leading the way, with the cash-for-clunkers program sending consumers into showrooms, depleting inventories and prompting renewed activity at plants across the country. The U.S. Federal Reserve reports that production of motor vehicles and parts increased 20.1 per cent in July from June, after falling 69.6 per cent in the first quarter of the year.
And the numbers support a broader, if fainter, recovery across the manufacturing sector. Surveys this week from Pennsylvania and New York - where the auto industry has always been secondary - show that producers are becoming more confident.
"Manufacturing is turning a corner and will help move the broader economy from recession to recovery," said Mark Zandi, chief economist of Moody's Economy.com.
In New York, the general business conditions index rose to its highest level since November, 2007. In Pennsylvania, more manufacturers said orders were increasing than those who cited a decrease.
Nationally, the chemical and plastics sector and hard-hit Old Economy industries such as paper and furniture also saw July production increases, Federal Reserve data showed.
"Orders started picking up last month," said Gina Svoboda, a manager at Scranton, Pa.-based Noble Biomaterials Inc.
Noble makes silver fibres used in the linings of Lululemon leggings and medical scrubs. Ms. Svoboda credited orders from Asia, health-care-related sales and clothing designers' plans for 2010 spring collections for the increase.
In Schenectady, N.Y., Mark Klein is finally getting his calls returned.
"The mere fact that customers are talking to me at all is a positive sign," said the head of sales and marketing at Accumetrics Associates Inc., which makes systems for measuring the temperature and horsepower of rotors in General Motors cars and Caterpillar heavy equipment.
Accumetrics' customers are also placing more orders. Mr. Klein said he's seeing an uptick in business, one that's modest but enough so that the 14-person company is about to hire two more engineers.
There are still major risks to the green shoots in the factory sector.
Manufacturing may be hampered by weak domestic retail sales, down 0.1 per cent in July and 8.3 per cent on the year. About three-quarters of U.S. manufactured goods stay in the country, and consumer spending represents about 70 per cent of U.S. gross domestic product.
And the path to a manufacturing-led recovery is strewn with other obstacles.
The revival has not been broad based, with long-lived producer goods, especially in the aerospace sector, still suffering, noted F.M. Scherer, professor at Harvard's Kennedy School of Government.
Manufacturers are worried that climate-change- and health-care-related policy changes could burden them with additional costs. An inability to raise prices means that profit margins are still under pressure. And improvements in productivity mean that more manufacturing will not necessarily translate into many more new jobs.
Noble Biomaterials has gone from 187 employees at the start of the year to 102 at present, and laid off another four workers just two weeks ago. The company hopes to bring some workers back in October.
"We've cut as far as we could. We've kept [research and development]at the same number of people. But as for the product, it's just being made as you need it," Ms. Svoboda said. "Nobody's in a position to be sitting on inventory any more."
