Manufacturing in U.S. Probably Grew at Slower Pace in August
ISM Index of Manufacturing in U.S. Increased in August
Michael Fein/Bloomberg
A worker nails decking planks at a production facility in Boston, Massachusetts.
A worker nails decking planks at a production facility in Boston, Massachusetts. Photographer: Michael Fein/Bloomberg
Sept. 1 (Bloomberg) -- James Bevan, chief investment officer at CCLA Investment Management, talks about the outlook for U.S. manufacturing data and the impact on his equities strategy. He speaks with Maryam Nemazee on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Manufacturing probably expanded in August at the slowest pace in almost a year, showing the industry that led the U.S. in recovery is now part of the economic slowdown, economists said before reports today.
The Institute for Supply Management’s factory index dropped to 52.7, the lowest since September 2009, from 55.5 in July, according to the median estimate of 78 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. Another report may indicate construction spending fell, after an earlier release showed companies unexpectedly cut jobs last month.
Factories may throttle back production as companies like Intel Corp. signal weaker consumer spending and others scale back inventory rebuilding. A further slowing in manufacturing threatens to stall the U.S. expansion as the housing market struggles and companies limit hiring.
“Manufacturing has completely passed its peak,” said Tom Porcelli, a senior economist at RBC Capital Markets Corp. in New York. “The once-strong pillar of growth is starting to fade.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates in the Bloomberg survey ranged from 49.9 to 56.
While manufacturing is cooling, a slumping housing market following the expiration of homebuyer incentives is depressing construction. Spending on all projects dropped 0.5 percent in July after a 0.1 percent gain a month earlier, according to the median estimate of economists surveyed before a Commerce Department’s report at 10 a.m.
ADP Report
A slowing economy is making companies reluctant to hire. ADP Employer Services said employment dropped 10,000 in August, the first decrease since January. The mediate estimate of 35 economists surveyed called for a gain of 15,000.
Economists project in two days that a Labor Department report will show companies may have added 42,000 workers to their payrolls in August. The average from May through July was 51,000 jobs, down from 200,000 in the previous two months.
Manufacturing, which accounts for about 11 percent of the economy, spearheaded the recovery from the worst recession since the 1930s as rising export demand led companies to ramp up spending on equipment and to replenish stockpiles.
Shares of manufacturers have gained this year compared with a decline in the broader indexes. The Standard & Poor’s Supercomposite Industrial Machinery Index has increased 6.2 percent this year through yesterday, while the S&P 500 has dropped 5.9 percent.
Regional Figures
Regional factory reports showed the manufacturing expansion has weakened. The Federal Reserve Bank of Philadelphia’s general economic index contracted this month for the first time in a year, while the New York Fed’s gauge rose less than forecast.
Fed Chairman Ben S. Bernanke last week said the central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if growth slows.
“Investment in equipment and software will almost certainly increase more slowly over the remainder of this year, though it should continue to advance at a solid pace,” Bernanke said.
Intel last week cut its third-quarter revenue projection. The world’s biggest chipmaker cited weaker-than-expected consumer demand for personal computers in mature markets as the reason for the adjustment.
Cisco Systems Inc., the world’s largest maker of networking equipment, in August forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.
Some U.S. manufacturers are benefiting from growth overseas. Caterpillar Inc., the Peoria, Illinois-based maker of construction and mining equipment, may add as many as 9,000 workers worldwide this year, Chief Executive Officer Doug Oberhelman said at a meeting with analysts Aug. 19.
Bloomberg Survey
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ADP ISM ISM Construct
Payroll Manu Prices Spending
,000’s Index Index MOM%
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Date of Release 09/01 09/01 09/01 09/01
Observation Period Aug. Aug. Aug. July
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Median 15 52.7 55.3 -0.5%
Average 10 52.8 55.6 -0.5%
High Forecast 55 56.0 59.0 0.5%
Low Forecast -50 49.9 52.0 -1.6%
Number of Participants 35 78 16 50
Previous 42 55.5 57.5 0.1%
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4CAST Ltd. -50 51.0 --- -1.3%
ABN Amro Bank --- 53.0 --- ---
Action Economics 0 53.0 54.0 -0.6%
Aletti Gestielle SGR --- 52.7 55.0 ---
Ameriprise Financial Inc 30 52.5 56.0 -0.5%
Banesto 25 54.1 --- -0.5%
Bank of Tokyo- Mitsubishi --- 52.6 --- 0.0%
Barclays Capital --- 52.5 --- -0.2%
Bayerische Landesbank --- 53.5 --- ---
BBVA -20 53.5 55.0 -0.5%
BMO Capital Markets 20 53.0 55.0 -0.5%
BNP Paribas --- 52.5 --- -0.8%
BofA Merrill Lynch Research 10 52.5 --- -0.7%
Briefing.com 0 53.0 --- -0.5%
Capital Economics --- 52.0 --- 0.2%
CIBC World Markets --- 54.0 --- ---
Citi --- 52.0 --- -0.7%
ClearView Economics --- 53.0 52.0 -0.4%
Commerzbank AG --- 53.0 --- ---
Credit Agricole CIB --- 52.0 --- ---
Credit Suisse --- 52.0 59.0 ---
Danske Bank --- 53.6 57.5 ---
DekaBank --- 53.5 --- -0.6%
Desjardins Group --- 52.0 --- -1.0%
Deutsche Bank Securities 15 52.0 --- 0.4%
Deutsche Postbank AG --- 53.0 --- ---
DZ Bank 30 52.8 --- ---
Exane --- 52.2 --- -0.5%
First Trust Advisors --- 54.5 --- -0.6%
FTN Financial --- 54.0 --- ---
Goldman, Sachs & Co. --- 52.0 --- -1.6%
Helaba --- 53.0 --- ---
High Frequency Economics 0 52.0 --- 0.0%
HSBC Markets -20 51.5 --- -0.7%
Hugh Johnson Advisors --- 56.0 --- ---
IDEAglobal 45 55.0 --- -0.5%
IHS Global Insight --- 51.5 --- -0.4%
Informa Global Markets 55 54.8 55.5 -0.8%
ING Financial Markets 35 54.0 55.0 -0.3%
Intesa-SanPaulo --- 52.0 --- -1.2%
J.P. Morgan Chase --- 52.5 --- -0.7%
Janney Montgomery Scott 15 52.8 --- -0.3%
Jefferies & Co. 25 54.0 --- -0.1%
Landesbank Berlin --- 52.0 --- -0.5%
Landesbank BW 35 51.0 --- ---
Maria Fiorini Ramirez --- 52.0 --- ---
MFC Global Investment 30 52.0 55.0 -0.8%
Mizuho Securities 20 52.0 --- -0.8%
Moody’s Economy.com -5 52.7 --- -0.7%
Morgan Keegan & Co. --- --- --- -0.5%
Morgan Stanley & Co. --- 52.5 --- 0.3%
National Bank Financial --- 53.5 --- ---
Natixis 30 53.4 --- ---
Nomura Securities Intl. 10 53.5 --- ---
Nord/LB 15 52.0 55.0 ---
Pierpont Securities LLC --- 53.0 --- ---
PineBridge Investments --- 53.8 --- 0.5%
PNC Bank --- 51.5 --- -1.2%
Prestige Economics --- 52.5 --- ---
Raiffeisen Zentralbank --- 53.0 57.0 ---
Raymond James --- 54.1 --- -0.6%
RBC Capital Markets --- 52.0 --- ---
RBS Securities Inc. --- 53.2 --- ---
Scotia Capital 10 52.0 --- ---
Societe Generale --- 52.5 --- ---
Standard Chartered -10 51.5 --- ---
State Street Global Markets 0 52.6 56.2 -0.4%
Stone & McCarthy Research --- 51.9 --- -0.4%
TD Securities 5 52.1 57.0 -0.3%
Thomson Reuters/IFR -35 50.1 --- -0.1%
Tullett Prebon --- 53.8 --- ---
UBS --- 54.0 --- -0.3%
Union Investment 30 54.5 --- ---
University of Maryland 20 55.0 56.0 -0.5%
Wells Fargo & Co. --- 54.8 --- -0.8%
WestLB AG 30 54.0 --- -0.5%
Westpac Banking Co. -20 49.9 --- -1.5%
Woodley Park Research 18 51.5 --- -1.0%
Wrightson ICAP -50 53.5 --- -0.5%
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To contact the reporter on this story: Courtney Schlisserman at cschlisserma@bloomberg.net
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