Business activity in the U.S. grew less than forecast in April, at a pace that’s consistent with steady expansion in the world’s largest economy.
The Institute for Supply Management-Chicago Inc. said today its business barometer dropped to 67.6 from March’s 70.6 level. Figures greater than 50 signal expansion, and the median forecast in a Bloomberg News survey of economists called for a decline to 68.2.
The pace of inventory rebuilding, which picked up in the first quarter, may cool in coming months as companies bring stockpiles in line with sales. At the same time, expanding economies overseas and more business investment are helping manufacturers such as engine-maker Cummins Inc. (CMI) boost sales and profits.
“The manufacturing sector still seems to be enjoying a solid recovery but the pace of expansion seems to have eased recently,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report.
The median forecast for the Chicago group’s factory gauge was based on projections from 49 economists. Estimates ranged from 62 to 71.3.
Stocks were little changed after the report, with the Standard & Poor’s 500 Index dropping less than 0.1 percent to 1,359.94 at 10:12 a.m. in New York.
The Chicago group’s employment measure fell to 63.7 from 65.6 a month earlier, which was the highest level since 1983. The production gauge decreased to 70 from 74.2.
The gauge of new orders declined to 66.3 from 74.5. The index of backlogs decreased to 62.4 from 69.6.
The group’s prices paid index fell to 81.8 from 83.4.
Other figures today showed consumer spending climbed in March as Americans spent more on food and fuel, indicating further income gains are needed to boost the biggest part of the economy. Purchases rose 0.6 percent after a revised 0.9 percent gain in February, the Commerce Department said.
Spending adjusted for changes in prices rose 0.2 percent in March after a 0.5 percent gain.
Economists watch the Chicago index and other regional manufacturing reports for an early reading on the outlook nationally. The Chicago group says its membership includes both manufacturers and service providers, making the gauge of measure of overall growth. Its members have operations across the U.S. and abroad.
Other measures of regional manufacturing were mixed in April. The Federal Reserve Bank of New York on April 15 said manufacturing expanded in that region this month at the fastest rate in a year. On April 21, the Federal Reserve Bank of Philadelphia said its measure dropped to the lowest level since November.
The ISM’s national factory index may fall to 59.5 this month after March’s 61.2, according to the median forecast of economists surveyed before the Tempe, Arizona-based group’s figures on May 2.
“Household spending and business investment in equipment and software continue to expand,” Federal Reserve policy makers said this week after their policy meeting.
The business spending that helped lead the economy out of recession in mid-2009 may be helped this year in part by President Barack Obama’s December compromise with congressional Republicans on taxes. Companies will be able to depreciate 100 percent of investments in capital equipment in 2011.
Demand from fast-growing countries like China and Brazil is spurring U.S. exports of machinery and consumer goods. Sales overseas reached the highest level on record in January before falling in February for the first time in six months.
Columbus, Indiana-based Cummins Inc., a maker of diesel engines, more than doubled its first-quarter income from a year earlier and increased its forecasts for sales and profit this year because of the recovering North American truck market.
“Our first-quarter results reflect continued strong growth in key international markets, especially China, India and Brazil,” Chairman and Chief Executive Officer Tim Solso said in a conference call this week. “We are seeing significant growth in demand for our products and services in nearly every geographic market we serve.”
Dearborn, Michigan-based Ford Motor Co. (F), the second-largest U.S. automaker, this week reported first-quarter profit of $2.55 billion, as fuel-efficient new models won higher prices.
“Our first-quarter performance is a step forward in our delivery of profitable growth,” Ford’s vice president Robert Shanks said on a conference call this week. “We’re investing for future growth.”
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