U.S. Manufacturing, Household Spending Probably Rose
Manufacturing, Household Spending in U.S. Probably Increased
Ariana Lindquist/Bloomberg
Goods are stacked in the tray warehouse at a Supervalu Inc. distribution center in Hopkins, Minnesot.
Goods are stacked in the tray warehouse at a Supervalu Inc. distribution center in Hopkins, Minnesot. Photographer: Ariana Lindquist/Bloomberg
Manufacturing probably accelerated for a fourth straight month in February after Americans picked up the pace of spending a month earlier, economists said before reports today.
The Institute for Supply Management’s factory index rose to an eight-month high of 54.5 from 54.1 in January, according to the median estimate of 78 economists surveyed by Bloomberg News. Readings above 50 signal growth. Consumer purchases in January rose 0.4 percent, the biggest gain in four months, a Commerce Department report may show.
Manufacturers remain at the forefront of the more than two- year-old expansion, aided by corporate investment in equipment, inventory rebuilding and a pickup in the auto industry. Risks to the industry that accounts for about 12 percent of the economy include higher fuel costs and a slowdown in Europe linked to its debt crisis.
“Manufacturing has been at the forefront of the recent improvements we’ve seen in overall economic activity,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “Though gas prices could hurt in the short term, there is still a lot of pent-up demand in the American economy that could be released now that the job market seems to be improving.”
Gasoline Prices
The price of a gallon of regular unleaded gasoline climbed to $3.73 as of Feb. 28, the highest since June of last year, after reaching a 10-month low of $3.21 on Dec. 20, according to AAA, the nation’s largest automobile association.
The Tempe, Arizona-based ISM is due to report its manufacturing index at 10 a.m. Estimates ranged from 52 to 56.
Elsewhere, euro-area manufacturing shrank for a seventh month and unemployment climbed to the highest level in more than 14 years. A factory gauge based on a survey of purchasing managers in the 17-nation region increased to 49 in February from 48.8 a month earlier, below the 50 line that divides expansion from contraction, London-based Markit Economics said today. Separate reports showed the jobless rate rose to 10.7 percent in January, the highest since October 1997.
The European factory survey contrasts with reports in China and India showing continued expansion in manufacturing.
Data from China today showed that a purchasing managers’ index rose for a third month to 51 in February from 50.5 in January. In India, a PMI released by HSBC Holdings Plc and Markit was close to an eight-month high.
Household Spending
Personal spending probably rose in January after little change in December and 0.1 percent gains in each of the previous two months, according to the survey median before the Commerce Department report at 8:30 a.m. in Washington. Incomes (PITLCHNG) probably climbed 0.4 percent after a 0.5 percent gain, the biggest back- to-back gains since February-March 2011.
Initial jobless claims last week may have held close to a four-year low, a sign the labor market is on the mend, another report may show. Initial claims rose to 355,000 last week from 351,000 the prior period, economists forecast the Labor Department will report at 8:30 a.m.
Less firing and faster job growth are boosting the outlook for spending and production. Payrolls grew by 243,000 workers in January, and the jobless rate fell to 8.3 percent, the lowest since February 2009, the Labor Department said Feb. 3.
Factory Jobs
Underscoring the strength in manufacturing, factory payrolls jumped 50,000 in January, the most in a year, while the industry’s workers put in the longest workweek on average since January 1998, the Labor Department monthly data showed.
Another survey, from the Institute for Supply Management- Chicago, showed that business activity in the U.S. accelerated in February to the fastest pace in 10 months. The group’s employment gauge climbed to the highest level since 1984.
Vehicle demand is driving production. Cars and light trucks sold at a 14.1 million annual rate in January, according to industry data. Excluding a surge in August 2009 tied to the government’s “cash-for-clunkers” program, it was the strongest month since May 2008.
Manufacturing, which sparked the early stages of the recovery as growing overseas economies propelled exports, has recovered after a lull tied to last year’s earthquake in Japan.
Bernanke View
“The recovery of the U.S. economy continues, but the pace of expansion has been uneven and modest by historical standards,” Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee in Washington yesterday. Manufacturing has “posted solid gains since the middle of last year, supported by the recovery in motor vehicle supply chains and ongoing increases in business investment, he said.
“For many products demand has been above our ability to produce,” Mike DeWalt, director of investor relations at Caterpillar Inc. (CAT), said on a Jan. 26 conference call with analysts. “We have invested in Caterpillar factories in the United States and around the world to increase production.”
Even with planned increases in capital expenditures this year, “we’re still very tight on many products and are currently quoting extended delivery times for them,” he said.
Machinery and equipment makers have outperformed the broader stock market. The Standard & Poor’s Supercomposite Machinery Index (S15MACH) has gained 19 percent so far this year, compared with an 8.6 percent increase for the S&P 500 Index.
Bloomberg Survey
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Pers Pers Initial ISM
Inc Spend Claims Manu
MOM% MOM% ,000’s Index
==============================================================
Date of Release 03/01 03/01 03/01 03/01
Observation Period Jan. Jan. 25-Feb Feb.
--------------------------------------------------------------
Median 0.4% 0.4% 355 54.5
Average 0.5% 0.4% 354 54.7
High Forecast 0.8% 0.6% 370 56.0
Low Forecast 0.2% 0.2% 345 52.0
Number of Participants 77 80 48 78
Previous 0.5% 0.0% 351 54.1
--------------------------------------------------------------
4CAST Ltd. 0.4% 0.4% 360 55.0
ABN Amro Inc. 0.5% 0.5% 358 54.0
Action Economics 0.5% 0.6% 355 54.5
Aletti Gestielle 0.5% 0.4% --- 54.4
Ameriprise Financial Inc 0.5% 0.3% 355 55.8
Banca Aletti & C spa 0.4% 0.3% 350 54.5
Banesto 0.5% 0.4% --- 54.5
Barclays Capital 0.4% 0.6% 350 55.0
BBVA 0.3% 0.4% 350 55.0
BMO Capital Markets 0.5% 0.5% 353 ---
BNP Paribas 0.4% 0.4% 355 54.4
BofA Merrill Lynch Resear 0.4% 0.6% 355 54.5
Briefing.com 0.4% 0.3% 355 54.5
Capital Economics 0.7% 0.3% --- 54.5
CIBC World Markets 0.5% 0.3% --- 55.1
Citi 0.3% 0.5% 345 54.0
ClearView Economics 0.6% 0.3% --- 55.0
Comerica Inc 0.3% --- --- ---
Commerzbank AG 0.4% 0.3% 350 54.5
Credit Agricole CIB 0.5% 0.4% --- 54.5
Credit Suisse 0.4% 0.5% 345 55.5
Daiwa Securities America 0.4% 0.3% --- 55.0
Danske Bank 0.6% 0.5% --- 54.6
DekaBank 0.4% 0.5% --- 55.0
Desjardins Group 0.4% 0.3% 355 55.0
Deutsche Bank Securities 0.6% 0.4% 350 56.0
Deutsche Postbank AG --- 0.4% --- 54.5
DZ Bank 0.4% 0.3% --- 54.1
Exane --- 0.4% --- 54.3
Fact & Opinion Economics 0.4% 0.4% 346 ---
First Trust Advisors 0.8% 0.4% 355 54.9
FTN Financial 0.6% 0.5% --- 55.1
Goldman, Sachs & Co. 0.4% 0.5% --- 54.0
Helaba 0.7% 0.4% 355 54.0
Herrmann Forecasting LLC 0.5% 0.5% 354 55.2
High Frequency Economics 0.4% 0.4% 360 55.0
HSBC Markets 0.5% 0.6% 355 55.0
IDEAglobal 0.3% 0.2% 355 55.0
IHS Global Insight 0.4% 0.4% --- 55.0
Informa Global Markets 0.3% 0.4% 357 55.0
ING Financial Markets 0.5% 0.4% 348 54.3
Insight Economics 0.7% 0.3% 355 54.5
Intesa Sanpaulo 0.6% 0.5% --- 54.3
J.P. Morgan Chase 0.5% 0.5% 355 54.5
Janney Montgomery Scott L 0.2% 0.5% --- 54.3
Jefferies & Co. 0.6% 0.5% 365 55.5
John Hancock Financial 0.3% 0.3% 355 54.9
Landesbank Berlin 0.5% 0.3% 370 54.0
Landesbank BW 0.4% 0.4% --- 55.5
Maria Fiorini Ramirez Inc --- --- 355 ---
Market Securities --- 0.5% --- 54.9
MET Capital Advisors --- --- --- 53.7
Mizuho Securities 0.6% 0.3% 355 54.0
Moody’s Analytics 0.4% 0.4% 350 55.2
Morgan Keegan & Co. 0.4% 0.3% --- ---
Morgan Stanley & Co. 0.5% 0.6% --- 54.0
National Bank Financial 0.4% 0.3% --- 54.5
Natixis 0.4% 0.4% --- 54.5
Nomura Securities Intl. 0.5% 0.5% --- 55.1
Nord/LB 0.4% 0.3% 350 54.0
OSK Group/DMG 0.5% 0.5% --- 54.3
O’Sullivan 0.4% 0.5% 350 54.0
Parthenon Group 0.6% 0.5% 359 54.2
Pierpont Securities LLC 0.3% 0.4% --- 55.5
PineBridge Investments 0.5% 0.5% 360 55.5
PNC Bank 0.4% 0.5% --- 55.5
Raiffeisenbank Internatio 0.5% 0.2% --- 55.1
Raymond James 0.7% 0.3% 360 54.0
RBC Capital Markets 0.4% 0.4% 355 54.0
RBS Securities Inc. 0.3% 0.3% --- 55.5
Scotia Capital 0.5% 0.4% 350 55.0
SMBC Nikko Securities 0.5% 0.4% --- 54.0
Societe Generale 0.3% 0.4% 350 56.0
Standard Chartered 0.7% 0.4% 345 55.0
Stone & McCarthy Research 0.4% 0.2% 351 52.0
TD Securities 0.6% 0.4% 345 55.2
UBS 0.4% 0.5% 350 55.0
Union Investment 0.4% 0.3% --- 54.0
University of Maryland 0.5% 0.4% 355 54.5
Wells Fargo & Co. 0.4% 0.4% --- 54.9
WestLB AG 0.5% 0.4% --- 55.2
Westpac Banking Co. 0.6% 0.6% 350 54.0
Wrightson ICAP --- 0.4% 355 54.5
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To contact the reporters on this story: Robert Willis in Washington at bwillis@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net
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