Industrial Production in U.S. Probably Grew as Home Building Lagged Behind

Industrial production in the U.S. probably climbed in April for a sixth consecutive month, while homebuilding hovered near recession lows, economists said before reports today.

Production at factories, mines and utilities increased 0.4 percent after growing 0.8 percent in March, according to the median forecast of 76 economists surveyed by Bloomberg News. Housing starts climbed 3.6 percent to a 569,000 annual rate last month, other figures may show.

Rising demand from overseas and business investment are lifting sales at companies like Caterpillar Inc. (CAT), which will probably keep manufacturing at the forefront of the economic expansion. A sustained recovery in housing may take time to develop as foreclosures put further pressure on property values.

“We should see gains in manufacturing in coming months on the back of strength in exports and business equipment spending,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “Housing has a long road ahead.”

The Federal Reserve’s production data are due at 9:15 a.m. in Washington. Economists’ estimates ranged from a drop of 0.4 percent to a 0.9 percent increase.

Auto making may be among industries that will cool in coming months as factories face a temporary shortage of parts following the earthquake and tsunami in Japan, economists said. That could show up in last month’s data, said Guatieri. “Growth is being damped a bit by supply disruptions,” he said.

Survey Results

Economists’ projections for housing starts, due at 8:30 a.m. from the Commerce Department, ranged from 500,000 to 600,000, the Bloomberg survey showed. Builders broke ground on 1.72 million houses a year on average in the decade before the recession began in December 2007. Starts slumped to a record low 554,000 in 2009.

Permits, a proxy for future construction, rose 0.9 percent to a 590,000 rate, according to the Bloomberg survey median.

Douglas Yearley Jr., chief executive officer at Toll Brothers Inc., the largest U.S. luxury-home builder, last week said the home-selling season from April through June, typically the busiest of the year, has been “disappointing” and that “people are still scared.”

Investors are more positive on the outlook for manufacturers than homebuilders. The Standard & Poor’s Supercomposite Machinery Index has climbed 6.3 percent since Dec. 31, compared with a 2 percent decline for the S&P Supercomposite Homebuilding Index.

Growing Exports

Manufacturing, which accounts for about 75 percent of industrial production, is likely to keep bolstering the world’s largest economy as an 18 percent drop in the dollar index from June 7, 2010, to April 29 made American-made goods more attractive abroad.

Exports jumped 4.6 percent in March, the biggest gain since 1994, to a record $172.7 billion. The gain reflected overseas demand for autos, chemicals and industrial machinery. Sales to customers in South and Central America reached a record, and purchases from clients in the European Union were the strongest since June 2008.

Caterpillar, the world’s largest construction-equipment maker, last month said it expects global economic growth this year of about 4 percent, with developing countries expanding by 6.5 percent and the U.S. growing by 3.5 percent.

The Peoria, Illinois-based company raised its full-year earnings forecast and said the outlook would have been higher had it not been for the March 11 earthquake in Japan.

“Our facilities in Japan were not damaged by the earthquake and tsunami, but many of our suppliers in Japan were,” Chief Executive Officer Doug Oberhelman said on an April 29 conference call. “As a result, we are experiencing sporadic production disruptions at many of our facilities around the world.”

                        Bloomberg Survey

================================================================
                           Housing Building     Ind.     Cap.
                            Starts  Permits    Prod.    Util.
                            ,000’s   ,000’s     MOM%        %
================================================================

Date of Release              05/17    05/17    05/17    05/17
Observation Period           April    April    April    April
----------------------------------------------------------------
Median                         569      590     0.4%    77.6%
Average                        566      585     0.4%    77.6%
High Forecast                  600      610     0.9%    78.3%
Low Forecast                   500      550    -0.4%    77.0%
Number of Participants          74       52       76       62
Previous                       549      585     0.8%    77.4%
----------------------------------------------------------------
4CAST Ltd.                     580      565     0.2%     ---
ABN Amro                       574     ---      0.5%     ---
Action Economics               570      580     0.4%    77.7%
Aletti Gestielle               560      600    -0.3%    77.2%
Ameriprise Financial           580      610    -0.3%    77.1%
Banesto                        568      588     0.5%     ---
Bantleon Bank AG               580      600     0.4%     ---
Barclays Capital               575     ---      0.2%    77.5%
Bayerische Landesbank         ---      ---      0.5%    77.7%
BBVA                           562      606     0.5%    77.8%
BMO Capital Markets            570      570     0.4%    77.7%
BNP Paribas                    570     ---      0.5%    77.4%
BofA Merrill Lynch             575      590     0.6%    77.8%
Briefing.com                   530      570     0.4%    77.5%
Capital Economics              590     ---      0.3%    77.5%
CIBC World Markets             550      570     0.5%    77.6%
Citi                           570      570     0.2%    77.4%
ClearView Economics            580      600     0.5%    77.8%
Commerzbank AG                 550      570     0.3%    77.6%
Credit Agricole CIB            560      590     0.5%    77.6%
Credit Suisse                  550      570     0.4%    77.7%
Daiwa Securities America       560     ---      0.4%     ---
DekaBank                       580      590     0.4%    77.6%
Desjardins Group               590      600     0.5%    77.7%
Deutsche Bank Securities       575      590     0.4%    77.8%
Deutsche Postbank AG           560     ---      0.3%     ---
Exane                          580     ---      0.3%     ---
Fact & Opinion Economics       575     ---      0.5%     ---
First Trust Advisors           560     ---      0.3%    77.6%
FTN Financial                  580      600     0.0%    77.4%
Goldman, Sachs & Co.           577     ---      0.5%    77.6%
Helaba                         560      590     0.2%    77.4%
High Frequency Economics      ---       600     0.6%    77.9%
Hugh Johnson Advisors          570     ---      0.3%    77.5%
IDEAglobal                     580      600     0.9%    78.3%
IHS Global Insight             568      599     0.2%     ---
Informa Global Markets         565      570     0.6%    77.8%
ING Financial Markets          575      595     0.5%    77.7%
Insight Economics              550     ---      0.5%    77.7%
Intesa-SanPaulo                575      575     0.5%    77.6%
ITG Investment Research        560     ---      ---      ---
J.P. Morgan Chase              570      580     0.5%    77.7%
Janney Montgomery Scott        565      580     0.5%    77.7%
Jefferies & Co.                565      560     0.0%    77.5%
Landesbank Berlin              550      565     0.9%    77.8%
Landesbank BW                  575      590     0.6%    77.8%
Manulife Asset Management      560      600     0.5%    77.7%
Maria Fiorini Ramirez          550     ---      ---      ---
MET Capital Advisors           500     ---      0.3%     ---
MF Global                      565      580     0.1%    77.4%
Moody’s Analytics              563      572     0.3%    77.7%
Morgan Keegan & Co.            568      605     0.4%    77.6%
Morgan Stanley & Co.           575     ---      0.7%    77.8%
National Bank Financial        578      590     0.5%    77.8%
Natixis                        576     ---      0.3%    77.5%
Nomura Securities              560      590     0.6%    77.8%
Nord/LB                        560      580     0.4%    77.7%
OSK Group/DMG                  550     ---      0.3%     ---
Parthenon Group                568      595     0.7%    77.9%
Pierpont Securities            600     ---      0.3%    77.6%
PineBridge Investments         574     ---      0.3%     ---
PNC Bank                       583      590     0.2%    77.5%
Raiffeisenbank International  ---      ---      0.5%    77.8%
Raymond James                  570      590     0.5%    77.8%
RBC Capital Markets            565     ---      0.5%    77.7%
RBS Securities Inc.            565     ---      0.4%    77.6%
Scotia Capital                 560      580     0.2%    77.5%
Societe Generale               555      570     0.0%     ---
Standard Chartered             560      590     0.4%    77.6%
State Street Global Markets    579      604     0.4%    77.6%
Stone & McCarthy Research      570      585    -0.4%    77.0%
TD Securities                  550      550     0.6%    77.5%
UBS                           ---      ---      0.2%    77.5%
University of Maryland         570      585     0.6%    77.9%
Wells Fargo & Co.              585     ---      0.3%    77.4%
WestLB AG                      575      595     0.4%    77.6%
Westpac Banking Co.            532      585     0.2%     ---
Wrightson ICAP                 540      550     0.2%    77.5%
================================================================

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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