The factory slump is abating as leaner inventories, smaller cutbacks in business investment and an end to the slump in homebuilding indicate the worst recession since the Great Depression is ending. The federal “cash-for-clunkers” program also is boosting demand for cars, analysts said.

“The wheels of the economic train have stopped moving in reverse and are starting to grind forward,” said Brian Bethune, an IHS Global Insight economist in Lexington, Massachusetts. “We’re starting to see a pickup in production, partly due to the turn in residential construction” and also in the automobile industry, he said.

The ISM’s production index rose to 57.9, the highest level since June 2007, from 52.5. A gauge of export orders increased to 50.5, indicating the first expansion since September, from 49.5 in June.

The reading for new orders rose to 55.3, the highest since July 2007, from 49.2 a month earlier. The inventory index rose to 33.5 from 30.8, which was the lowest level since 1982. A figure below 50 means manufacturers are reducing stockpiles.

The employment index rose to 45.6 from 40.7.

The index of prices paid increased to 55 from the breakeven point of 50 in June.

Supplier deliveries

The supplier delivery gauge, a measure of the time it takes to receive goods, rose to 52 from 50.6. The measure of orders waiting to be filled rose to 50 from 47.5.

Reports Monday also show manufacturing improving elsewhere.

The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8, the highest level in a year, from 51.8 in June, CLSA Asia-Pacific Markets said Monday in an e-mailed statement. An official index, released August 1, also expanded.

UK manufacturing expanded in July for the first time in more than a year. A gauge based on a survey of factories climbed to 50.8 from a revised 47.4 in June, the Chartered Institute of Purchasing and Supply and Markit said Monday in London. Markit also said its index of euro-area manufacturing activity rose for a fifth month in July.

In the US, the Institute for Supply Management-Chicago Inc. said July 31 that its business barometer increased to 43.4 in July, the highest level in 10 months.

Corporate earnings

Stocks gained in the past two weeks as reports pointed to an economy on the mend and companies such as Motorola Inc., Caterpillar Inc. and Dow Chemical Co. reported better-than-estimated earnings. The Standard & Poor’s 500 Index ended last week at 987.47, up 5 percent from July 17 and 46 percent from a 12-year low reached on March 9.

The emergence from bankruptcy of General Motors Co. and Chrysler Group LLC may alleviate some of the pressure on automotive suppliers, and government efforts to revive auto sales will give factories a further boost in coming months.

The “cash-for-clunkers” trade-in program begun this month has spurred sales. The House of Representatives on July 31 approved an emergency measure to add $2 billion to the automobile purchase program after a burst of demand exhausted most of the initial $1 billion in less than a week.

Lawmakers had expected the program to generate about 250,000 vehicle sales and to have enough money to last to about November 1. The Senate may act on the bill this week, said Jim Manley, a spokesman for Majority Leader Harry Reid.

Source: Bloomberg