Manufacturing, Housing Probably Improved: U.S. Economy Preview
Manufacturers probably received more orders in April and home sales rose, a sign the U.S. expansion is still on track, economists said before reports this week.
Factory bookings for long-lasting goods rose 0.3 percent last month after falling 3.9 percent in March, according to the median forecasts of 61 economists surveyed by Bloomberg News before a May 24 Commerce Department report. Other figures may show purchases of existing and new houses also climbed.
Manufacturers may keep forging ahead as automakers crank out more cars and trucks, while housing will probably benefit from record-low mortgage rates that are making properties more affordable. Nonetheless, those industries alone will fail to spur a pickup in growth without bigger increases in employment throughout the economy that will propel consumer spending.
“The economy is growing, but it’s just not growing at an inspiring pace,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “The production numbers look OK, the housing market looks OK, the thing we’re more concerned about is the labor market.”
A Federal Reserve report last week showed factory production rose 0.6 percent in April. About half the gain came from auto making, which jumped 3.9 percent following a 1.2 percent increase in the prior month.
Another measure of strength, the Institute for Supply Management’s manufacturing index, climbed to 54.8 in April, the highest level in almost a year, as orders picked up. Readings greater than 50 signal growth.
‘Doing Very Well’
“There’s lots of good things going on from an industrial perspective,” Art Beattie, chief financial officer of Southern Co., the largest U.S. power company by market value, said during a May 15 investor conference. “A lot of our chemical manufacturers are doing very well. Our steel manufacturers are near full capacity. Automotive production and the suppliers for those automotive plants are doing very well.”
Factory production helped sustain the expansion while the housing market stabilized.
Existing-home sales rose 3.1 percent to a 4.62 million annual rate, economists project a report from the National Association of Realtors will show May 22. A day later, figures from the Commerce Department may show sales of newly built houses rose 2.1 percent to a 335,000 pace, according to the survey median.
Housing starts increased to a 717,000 annual rate in April, more than anticipated, a report showed last week.
Homebuilders have grown more optimistic as a result of the improvement in sales. The National Association of Home Builders/Wells Fargo confidence index jumped to a five-year high in May, the Washington-based group reported last week.
A more stable housing market may help lift consumers’ moods. The Thomson Reuters/University of Michigan final sentiment index for May is projected to come in at 77.8, the same as the preliminary reading and the highest since January 2008. It would mark the first time since monthly data began in 1978 that the index advanced for a nine consecutive months.
Bloomberg Survey ============================================================== Release Period Prior Median Indicator Date Value Forecast ============================================================== Exist Homes Mlns 5/22 April 4.48 4.62 Exist Homes MOM% 5/22 April -2.6% 3.1% Richmond Fed Index 5/22 May 14 11 New Home Sales ,000’s 5/23 April 328 335 New Home Sales MOM% 5/23 April -7.1% 2.1% Durables Orders MOM% 5/24 April -3.9% 0.3% Durables Ex-Trans MOM% 5/24 April -1.3% 0.8% Cap Goods Core MOM% 5/24 April -3.6% 0.6% Cap Goods Core Ship MOM 5/24 April 2.6% -1.0% Initial Claims ,000’s 5/24 19-May 370 370 Cont. Claims ,000’s 5/24 12-May 3265 3250 U of Mich Conf. Index 5/25 May F 77.8 77.8 =============================================================
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