Manufacturing activity picks up in December

The manufacturing sector bounced back in December from its lowest level of the year, bolstered by gains in hiring, ending 2012 on a positive note.

The index that measures manufacturing activity increased to 50.7 in December after a slowdown in November to 49.5, the lowest level of the year, the Institute for Supply Management said Wednesday.

The sector has produced weak results in the past few months, contracting in four of the past seven months.

Hiring expanded to 52.7, an increase of 4.3 percentage points, after contracting in November for the first time since September 2009.

Export and import indexes also expanded last month after six months of contraction for exports and four for imports.

Jobs numbers for December are due out Friday. The labor market is gradually improving but not at a pace fast enough to significantly lower the unemployment rate.

The deal struck between the White House and congressional leaders to avoid tax hikes and spending cuts included a one-year extension of federal unemployment benefits to help out those who have been out of work for at least six months.

Manufacturers had joined business groups in pressing for a broad deal on taxes and spending.

This survey was completed before Congress wrapped up its work on Tuesday, a day past the deadline for taxes to go up and spending cuts to take effect, so reaction to the final legislation could emerge in January figures.

Congress and the White House also face another fight within the next couple of months — a potential battle over the debt limit, rooting out additional spending cuts to replace those in the remaining 10 months of the sequester and completion of an omnibus spending bill for the remainder of the 2013 fiscal year.

Despite the agreement to halt most tax cuts, many taxpayers will see their paychecks shrink with the expiration of the payroll tax cut, which wasn't renewed after being in place two years.