Related News:
Businesses Expand Less Than Forecast, Chicago Index Shows
Business activity in the U.S. cooled more than forecast in May, a sign manufacturing may be leveling off after leading the recovery in the world’s largest economy.
The Institute for Supply Management-Chicago Inc. said today its business barometer fell to 56.6 this month, the lowest since November 2009, from 67.6 in April. Figures greater than 50 signal expansion. Economists forecast the gauge would fall to 62, according to the median estimate in a Bloomberg News survey.
Manufacturers that led the recovery as exports rose and business investment picked up are facing challenges from higher raw materials costs and the effects of Japan’s earthquake and tsunami. Deere & Co. (DE), the world’s largest farm-equipment maker, raised its 2011 earnings forecast less than analysts estimated as disruptions from Japan and costlier inputs lowered profit.
“There is a consistent story across regions that manufacturing was slowing during the month, although it’s unclear for how long or what’s next,” said Jim O’Sullivan, global chief economist at MF Global Inc. in New York, who forecast the index would fall to 58. “Japan supply-chain issues appear to be part of the story, in addition to the impact of the jump in oil and gasoline prices earlier in the year.”
Estimates from 55 economists for the Chicago purchasers’ index ranged from 54 to 67. The measure’s 11-point drop this month was the biggest since October 2008.
Other reports today showed home prices and consumer confidence declined.
Home Prices
The S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent from March 2010, the biggest year-over-year decline since November 2009, the group said. At 138.16, the gauge was the weakest since March 2003.
The Conference Board’s household sentiment index dropped to 60.8 in May from a revised 66 reading the prior month, figures from the New York-based private research group showed. The median forecast of economists surveyed by Bloomberg News called for a rise to 66.6.
The Chicago group’s production gauge fell to 56 from April’s reading of 70. The gauge of new orders dropped to 53.5 from 66.3.
An index of prices paid eased to 78.6 from 81.8.
The group’s employment measure decreased to 60.8 from 63.7 the prior month.
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 with operations in the U.S. and abroad, making the gauge a measure of overall growth.
Business Cools
The Institute for Supply Management’s monthly national factory index, due tomorrow, slid to 57.5 in May from 60.4, according to the median projection in a Bloomberg News survey. A reading above 50 signals expansion.
Disruptions related to the March earthquake and tsunami in Japan led to a plunge in U.S. automobile output, causing industrial production to stall in April, a Federal Reserve report showed May 17.
Deere, based in Moline, Illinois, said on May 18 that earnings will be $2.65 billion in the year through October, more than the $2.5 billion forecast in February. The projection fell short of the average analysts’ estimate in a Bloomberg survey for profit of $2.67 billion.
The manufacturer’s forecast includes a negative impact of about $300 million in sales and $70 million in operating profit because of disruptions from the Japanese earthquake and tsunami. Global demand for agriculture and construction equipment will still drive profits, the company said.
Slower Growth
Economic growth slowed to a 1.8 percent annual rate in the months of this year after expanding at a 3.1 percent pace in the fourth quarter, according to Commerce Department figures.
While economic growth in the first three quarter was “somewhat softer than anticipated,” the slowdown will “probably prove temporary” with manufacturing data and financial markets improving, Federal Reserve Bank of New York President William C. Dudley said at a May 6 press conference.
The Fed leader said he expects the impact of rising commodity prices on inflation to be “transitory.”
To contact the reporters on this story: Alexander Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
Rate These Stories
Rate this Page