Manufacturing in U.S. Probably Grew in June as Companies Updated Equipment

Manufacturing in the U.S. probably expanded in June for an 11th consecutive month, powered by gains in exports and business investment, economists said before reports today.

The Institute for Supply Management’s factory index fell last month to 59, close to an almost six-year high, from 59.7 in May, according to the median estimate of 79 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. Other reports may show declines in construction spending and the number of contracts to buy previously owned homes in May.

Companies like Deere & Co. and 3M Co. are receiving more orders as customers update equipment and rebuild inventories, helping the economy recover from the worst recession since the 1930s. A pickup in production is also prompting factories to hire, indicating growth in the industry will help the U.S. endure the European debt crisis.

“Manufacturing has been about the only bright spot,” said David Resler, chief economist at Nomura Securities International Inc. in New York. The economy is “still growing, but the pace of activity does seem to have decelerated abruptly,” he said.

Other figures today showed manufacturing in China and Europe is cooling. China’s Purchasing Managers’ Index fell to 52.1 in June from 53.9 the previous month. A gauge of factory output in the 16-member euro region declined to 55.6 last month from 55.8.

April Reading

The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates in the Bloomberg survey ranged from 55.9 to 61.2. In April, the measure rose to 60.4, the highest since June 2004.

Also at 10 a.m., figures from the Commerce Department will show construction spending fell 0.8 percent in May after a gain of 2.7 percent the prior month, according to the median estimate of 54 economists surveyed. Projections ranged from a drop of 3 percent to a gain of 0.5 percent.

Manufacturing, which accounts for about 11 percent of the economy, has been a leader in the recovery as demand from abroad strengthened and U.S. firms picked up production and spending to meet demand after a record drawdown in inventories last year. The gains have encouraged hiring in the industry.

Factories have added 126,000 workers during the first five months of this year, matching the most successive gains since 2006, according to the Labor Department. Manufacturers added another 25,000 employees in June, economists said before tomorrow’s monthly jobs report from the Labor Department.

Factory Shares

The manufacturing shares have outperformed the market. The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Deere and Caterpillar Corp., has increased 0.6 percent this year compared with a 7.6 percent decline in the broader S&P 500.

Manufacturers in the U.S. are forecasting further gains. 3M, the maker of 55,000 products from Post-it Notes to Scotch tape, this week projected second-quarter sales that topped analysts’ estimates as demand recovers.

Sales will be $6.6 billion to $6.75 billion, the St. Paul, Minnesota-based company said in a June 28 statement. Analysts predicted $6.56 billion, the average of eight estimates compiled by Bloomberg. Total-dollar sales are projected to rise 4 percent to 6 percent compared with the first quarter of 2010.

While manufacturing growth is being sustained, the housing market is struggling following the expiration at the end of April of a homebuyer tax credit.

The National Association of Realtors will publish its index of signed purchase agreements, or pending home resales, at 10 a.m. today. The figures will show a 14 percent decline in May after three months of gains, according to the survey.

Figures from the Labor Department will show jobless claims declined to a level that indicates improvement in the labor market is taking time to unfold. First-time filings for unemployment benefits dropped to 455,000 last week from 457,000, according to the median estimate in the Bloomberg survey.

                      Bloomberg Survey

==============================================================
                           Initial      ISM Construct  Pending
                            Claims     Manu Spending    Homes
                            ,000’s    Index     MOM%     MOM%
==============================================================

Date of Release              07/01    07/01    07/01    07/01
Observation Period          26-Jun     June      May      May
--------------------------------------------------------------
Median                         455     59.0    -0.8%   -14.2%
Average                        454     58.7    -0.8%   -14.2%
High Forecast                  475     61.2     0.5%    -4.0%
Low Forecast                   440     55.9    -3.0%   -25.0%
Number of Participants          46       79       54       36
Previous                       457     59.7     2.7%     6.0%
--------------------------------------------------------------
4CAST Ltd.                     460     58.0    -0.3%   -12.5%
Action Economics               455     58.0    -0.7%   -10.0%
Aletti Gestielle SGR           460     58.7     ---      ---
Ameriprise Financial Inc       450     58.5    -0.8%   -20.0%
Banesto                       ---      58.9    -0.5%    -9.6%
Bank of Tokyo- Mitsubishi      460     61.2    -0.9%     ---
Bantleon Bank AG              ---      59.1     ---      ---
Barclays Capital               445     58.5    -0.5%   -15.0%
Bayerische Landesbank         ---      59.0     ---      ---
BBVA                           449     60.0     0.1%   -12.5%
BMO Capital Markets            450     59.0    -0.9%   -10.0%
BNP Paribas                    455     59.0    -2.0%     ---
BofA Merrill Lynch Research    455     58.5    -1.0%     ---
Briefing.com                   460     59.0    -1.0%   -12.5%
C I T I C Securities          ---      58.9     ---      ---
Capital Economics             ---      59.5     0.5%   -20.0%
CIBC World Markets            ---      59.0     ---      ---
Citi                           450     59.0    -0.8%     ---
ClearView Economics           ---      58.5    -2.0%     ---
Commerzbank AG                 445     59.0     ---    -10.0%
Credit Agricole CIB           ---      59.3     ---      ---
Credit Suisse                  450     58.0     ---      ---
Daiwa Securities America      ---      58.0     0.0%     ---
DekaBank                      ---      58.5    -0.5%     ---
Desjardins Group               452     58.5    -1.0%     ---
Deutsche Bank Securities      ---      59.0     0.3%    -4.0%
Deutsche Postbank AG          ---      59.0     ---      ---
DZ Bank                       ---      58.9     ---      ---
Exane                         ---      58.0     ---      ---
First Trust Advisors           450     58.7     0.0%     ---
Fortis                        ---      60.0     ---    -14.4%
Goldman, Sachs & Co.          ---      58.0     0.2%     ---
Helaba                         455     59.5     ---      ---
High Frequency Economics       457     59.0     0.0%   -20.0%
HSBC Markets                   460     57.5    -0.3%    -7.0%
IDEAglobal                     445     59.5    -0.5%   -10.0%
IHS Global Insight            ---      59.0    -0.2%     ---
Informa Global Markets         450     57.5    -1.5%   -11.0%
ING Financial Markets          450     58.5    -0.5%   -15.2%
Insight Economics              450     59.0    -1.0%   -10.0%
Intesa-SanPaulo               ---      58.0    -0.4%     ---
J.P. Morgan Chase              450     58.5    -0.5%    -9.4%
Janney Montgomery Scott       ---      57.5    -2.0%     ---
Jefferies & Co.                463     59.5    -0.3%     ---
Landesbank Berlin              440     58.0    -3.0%     ---
Landesbank BW                 ---      57.7    -0.8%     ---
Maria Fiorini Ramirez          460     59.5     ---      ---
MF Global                      455     58.5    -1.5%   -20.0%
MFC Global Investment          450     58.3    -1.0%     ---
Mizuho Securities              470     58.0    -1.0%   -15.0%
Moody’s Economy.com            455     59.3    -1.4%   -11.5%
Morgan Keegan & Co.           ---      ---     -1.3%     ---
Morgan Stanley & Co.           455     59.0    -0.6%     ---
National Bank Financial       ---      59.0     ---      ---
Natixis                       ---      59.0     ---      ---
Nomura Securities Intl.       ---      59.0     ---      ---
Nord/LB                       ---      58.0     ---      ---
Pierpont Securities LLC        450     59.5     ---      ---
PineBridge Investments        ---      58.5    -1.5%   -11.6%
PNC Bank                      ---      59.2    -1.5%     ---
Raiffeisen Zentralbank        ---      58.5     ---    -15.0%
Raymond James                  460     59.2    -2.0%     ---
RBC Capital Markets            448     58.4     ---    -24.0%
RBS Securities Inc.            455     59.5     ---      ---
Ried, Thunberg & Co.           460     59.5    -0.5%   -20.0%
Societe Generale              ---      59.0     ---      ---
Standard Chartered            ---      59.0     ---    -20.0%
State Street Global Markets    460     57.9    -0.7%   -14.0%
Stone & McCarthy Research      455     57.6     0.0%     ---
Thomson Reuters/IFR            455     60.2    -2.0%   -20.0%
Tullett Prebon                 475     59.0    -0.6%   -15.2%
UBS                            450     59.0    -1.0%   -20.0%
UniCredit Research             450     59.0     ---      ---
Union Investment              ---      59.1     ---      ---
University of Maryland         455     58.5    -0.7%   -14.3%
Wells Fargo & Co.             ---      56.9    -0.9%     ---
WestLB AG                     ---      59.0    -0.7%    -6.0%
Westpac Banking Co.            455     58.0    -1.8%   -25.0%
Woodley Park Research         ---      55.9    -1.1%    -8.1%
Wrightson Associates           460     58.5    -0.5%   -20.0%
==============================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.