Manufacturing growth picks up pace

The survey's new orders and inventories indexes each expanded after contracting. 

New orders rose to 53.3 in January from 49.7 in December, while inventories improved to 51 from 43, a sign that manufacturers are preparing to increase their production.

Production numbers were up last month as well, expanding at a faster pace. 

In the fourth quarter, businesses reported slowing inventories, a contributing factor as to why the economy shrank in the final three months of the year to an annual rate of 0.1 percent. Severe cuts in defense spending were a major contributor as Congress faces billions in automatic spending cuts set for March 1.

Hiring also picked up pace in January to 54 from 51.9. 

On top of uncertainty over tax and spending policies, a weaker global economy dampened demand for U.S. exports.

"Even though we averted the cliff, Washington still failed to make reforms to spending and entitlement programs, which remain a major concern," said Chad Moutray, chief economist for the National Association of Manufacturers (NAM) in a blog post.

"There have been some signs of progress in in a few economic indicators, which could give us some hope in the coming months, but until manufacturers feel that the economic landscape is on a firmer footing, hiring will remain skittish," he said. 

The national jobs report released Friday morning showed that manufacturers added 4,000 jobs last month, the fourth straight monthly increase, of the 157,000 total jobs added. 

But manufacturing hiring continues to be slow. 

With the latest revisions, the manufacturing sector contributed 9.2 percent of all the jobs added in the first six months of 2012. 

Since then, though, the sector's job growth represents only 15,000 of 1.2 million in gains. 

Overall, manufacturers have lost 7,000 workers since July, according to NAM.

"Something is clearly wrong with that picture," Moutray said.

"We need to move back to a position where manufacturing is once again making outsized contributions to growth and employment," he wrote. "We saw manufacturers’ optimism plummet throughout 2012 and many manufacturers pulled back on hiring and investing in their businesses upon worries about slowing sales and fiscal challenges. Clearly that this cautious pattern has continued to start 2013."