Business Activity in U.S. Expands Faster Than Forecast in Chicago Survey
Business activity in the U.S. expanded at a faster pace than forecast in March, signaling manufacturing remains a driver of growth in the world’s largest economy.
The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 70.6 this month from February’s 71.2 reading that was the highest since July 1988. The index exceeded the 69.9 median forecast of economists surveyed by Bloomberg News. Figures greater than 50 signal expansion.
Strengthening sales in the U.S. and faster growth in overseas markets is helping manufacturers like United Technologies Corp. (UTX) to boost profit. In addition, many businesses are still rebuilding the stockpiles they slashed during the recession and controlled in the early stage of the recovery.
“Continued strength in manufacturing is the bottom line here,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York, who had forecast a reading of 70. “We’ve had strong domestic demand and exports driving the gains.”
Other reports today showed consumer confidence rose for the first time in five weeks as Americans said their finances were in better shape, and applications for jobless benefits fell.
The Bloomberg Consumer Comfort Index improved to minus 46.9 in the period ended March 27 from a seven-month low of minus 48.9 the prior week. Readings this low are historically seen during recessions, according to Gary Langer, president of Langer Research Associates LLC in New York, which compiles the index for Bloomberg.
Fewer Claims
The number of Americans applying for unemployment insurance fell by 6,000 to 388,000 in the week ended March 26, according to data from the Labor Department. They were projected to fall to 380,000 from 382,000 initially reported for the prior week, according to the median forecast of 42 economists in a Bloomberg survey. Estimates ranged from 370,000 to 390,000.
Stocks swung between gains and losses, depressed by the higher than projected number of claims. The Standard & Poor’s 500 Index was little changed at 1,328.38 at 10:22 a.m. in New York.
The median forecast for the Chicago group’s factory gauge was based on projections from 54 economists. Estimates ranged from 64 to 73.9.
The employment measure climbed to 65.6, the highest level since 1983, from 59.8 in the prior month, and the production gauge decreased to 74.2 from 78.2.
Growing Backlogs
The gauge of new orders fell to 74.5 from 75.9. The index of backlogs increased to 69.6, the highest since 1974, from 61.8.
The report also showed the cost of raw materials continues to climb. The group’s prices paid index rose to 83.4 from 81.2.
United Technologies, the maker of Pratt & Whitney jet- engines and Otis elevators, is among companies benefiting from growth in the so-called BRIC countries that cover Brazil, Russia, India and China. The Hartford, Connecticut-based company this month boosted the low end of its 2011 earnings forecast amid improving markets across its divisions.
“We see a lot of momentum and growth in emerging markets that have outpaced really developed markets,” Louis Chenevert, chairman and chief executive officer, said on a conference call with investors on March 23. “I’m confident that the momentum will continue.”
Economists watch the Chicago index and other regional manufacturing reports for an early reading on the national outlook. The Chicago group says its membership includes both manufacturers and service providers, making the gauge a measure of overall growth. Its members have operations across the U.S. and abroad.
Regional Strength
Other regional factory reports showed manufacturing is accelerating. The Federal Reserve Bank of Philadelphia’s index indicated factories expanded in March at the fastest pace since 1984, while the New York Fed’s measure rose to a nine-month high.
The ISM’s national factory index may be little-changed at 61 this month after February’s 61.4 reading that was the highest level since May 2004, according to the median forecast of economists surveyed. The Tempe, Arizona-based group’s figures are due tomorrow.
Federal Reserve policy makers have said the economy is on a “firmer footing,” helped by growth in household spending and business investment in equipment and software, according to a statement after their March 15 meeting.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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