Business Activity in U.S. Unexpectedly Grew at a Faster Pace
Business activity in the U.S. unexpectedly expanded in June at a faster pace as production and employment rebounded.
The Institute for Supply Management-Chicago Inc. said today its business activity barometer increased to 52.9 from 52.7 in May. A reading of 50 is the dividing line between growth and contraction. Economists projected the purchasing managers’ gauge would decline to 52.3, according to the median of 51 estimates in a Bloomberg News survey.
The report contrasts with other regional figures this month that showed manufacturing was cooling. The industry is holding steady even as the fallout of the European debt crisis limits orders and anxiety over the so-called fiscal cliff in the U.S. holds back further expansion.
“We don’t see any scope for a near-term significant pick- up in manufacturing, but it’s not straight into the gutter either,” said Sean Incremona, senior economist at 4Cast Inc. in New York, who projected the Chicago index would rise. “It does look like we can maintain a mild pace of growth in the sector.”
Stocks jumped, joining a global rally, after European leaders reached an agreement that eased concern banks will fail. The Standard & Poor’s 500 Index climbed 2 percent to 1,355.77 at 10:22 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.65 percent from 1.58 percent late yesterday.
Projections in the Bloomberg survey ranged from 50 to 56.
Economists watch the Chicago index and regional manufacturing reports for an early reading on the national outlook. The group says its membership includes both manufacturers and service providers with operations in the U.S. and abroad, making the gauge a measure of total growth.
Consumer confidence declined in June to the lowest level this year as the labor market showed few signs of improving., another report showed.
The Thomson Reuters/University of Michigan final sentiment index fell to 73.2 this month from 79.3 in May. The gauge was projected to hold at the preliminary reading of 74.1, according to the median forecast of economists surveyed by Bloomberg News.
Consumer spending stalled in May as slower job gains and a lack of wage growth prompted Americans to cut back, figures from the Commerce Department as showed today.
Purchases were unchanged, the weakest since November, after a 0.1 percent rise the prior month that was smaller than initially reported.
The Institute for Supply Management’s national factory index, which will be reported on July 2, probably slid to 52 in June from 53.5 the prior month, according to the median projection in a Bloomberg survey. As in the Chicago survey, a reading greater than 50 signals expansion.
The Chicago group’s production gauge climbed to 57 from 50. The employment measure increased to 60.4, a four-month high, from 57 the prior month.
The report also showed a slowdown in bookings. The index of new orders dropped to 51.9, the lowest since September 2009, from 52.9. The measure of backlogs slumped to 42.2, also the weakest in almost three years.
“It’s obvious that our customers are keeping inventories down and are scheduling orders based solely on known demand due to the economic uncertainty,” M. Jack Sanders, president and chief operating officer of Sonoco Products Co., said at a June 13 conference.
“There’s no noticeable movement in one direction or the other,” said Sanders, whose Hartsville, South Carolina-based company makes boxes, food cans and industrial packaging.
Other regional reports pointed to a slowdown. Manufacturing in the Philadelphia area shrank in June at the fastest pace in almost a year, while New York-region factories expanded at the slowest pace in seven months, according to reports issued earlier this month.
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