Manufacturing in U.S. Probably Expanded After Three-Year Low
Manufacturing in the U.S. probably expanded in December, showing the industry is stabilizing after reaching a three-year low, economists said before a report today.
The Institute for Supply Management’s factory index rose to 50.4 from November’s 49.5, which was the lowest since July 2009, according to the median forecast of 68 economists surveyed by Bloomberg. A reading of 50 marks the dividing line between expansion and contraction. Construction spending increased in November, separate figures may show.
Sustained growth in the U.S., in part due to a housing rebound, and steadying overseas markets are helping underpin factory orders and keeping manufacturing from faltering. At the same time, the threat of about $600 billion in tax increases and budget cuts was a hurdle to bigger gains in investment and production at the end of 2012.
“It’s a small improvement, which shows there isn’t extreme near-term pessimism,” said Guy Berger, an economist at RBS Securities Inc. in Stamford, Connecticut. “Fiscal policy uncertainty has kept manufacturing in a zone where it’s not growing rapidly but not shrinking rapidly either.”
The Tempe, Arizona-based ISM’s figures are due at 10 a.m. New York time. Estimates in the Bloomberg survey ranged from 48 to 52.
Also at 10 a.m., Commerce Department figures may show construction spending climbed 0.6 percent as record-low mortgage rates lifted property purchases and encouraged homebuilding, according to the Bloomberg survey median. Projections ranged from no change to a gain of 1.5 percent.
Manufacturing, which accounts for about 12 percent of the economy, was at the forefront of the recovery that began in June 2009.
Regional Data
Recent regional reports show a mixed picture. Manufacturing in the Philadelphia area unexpectedly expanded in December to an eight-month high, while New York-region factories shrank for the fifth straight month.
The automobile industry remains one source of growth. Cars and light trucks sold at a 15.5 million annual rate in November, the most since February 2008, boosted in part by buyers replacing cars damaged by superstorm Sandy, according to data from Ward’s Automotive Group.
Manufacturing shares have rebounded since the end of July. The Standard & Poor’s Supercomposite Machinery Index (S15MACH), which includes Caterpillar Inc. and Deere & Co., has climbed 13.2 percent, outpacing a 3.4 percent rise in the broader S&P 500 (SPX) measure.
Construction Equipment
An improving housing market also is helping manufacturers such as Illinois Tool Works Inc. (ITW), a maker of welding equipment, construction supplies and auto parts.
“On the construction side, certainly we do expect housing starts to get better from where they’ve been,” Ronald Kropp, chief financial officer of Glenview, Illinois-based Illinois Tool Works, said on a Dec. 14 conference call with analysts. “Offsetting that is more than 50 percent of our construction business is outside of the U.S., and Europe and Australia, which is a big piece of it, is still slowing or negative. So, there are some upsides on the U.S. side from residential, but offset by international.”
Nationwide, American manufacturers are more optimistic about the outlook for sales and spending this year than service providers, signaling that factories will support the economic expansion after they slumped in recent months, according to a survey released Dec. 11 by the ISM group.
Purchasing managers at factories anticipate sales will grow 4.6 percent in 2013 and business investment will increase 7.6 percent, the report showed. By comparison, service providers estimate revenue will grow 4.3 percent this year and that capital spending will rise 7 percent, the ISM said.
There are also signs that the worst of the slowdown in overseas markets is over. China’s manufacturing expanded at the fastest pace in 19 months in December, boosting optimism that a recovery in the world’s second-biggest economy is gaining traction, according to data this week.
Bloomberg Survey
=============================================
ISM Construct
Manu Spending
Index MOM%
=============================================
Date of Release 01/02 01/02
Observation Period Dec. Nov.
---------------------------------------------
Median 50.4 0.6%
Average 50.3 0.6%
High Forecast 52.0 1.5%
Low Forecast 48.0 0.0%
Number of Participants 68 39
Previous 49.5 1.4%
---------------------------------------------
4CAST 51.5 0.4%
ABN Amro 49.0 ---
Action Economics 50.0 0.8%
Aletti Gestielle 50.2 ---
Bank of Tokyo-Mitsubishi 51.0 0.5%
Barclays 50.0 0.6%
BMO Capital Markets 50.0 ---
BNP Paribas 49.7 0.0%
BofA Merrill Lynch 49.5 0.9%
Briefing.com 51.0 0.5%
Capital Economics 51.0 1.0%
CIBC World Markets 50.1 ---
Citi 50.0 0.6%
ClearView Economics 49.3 0.5%
Commerzbank AG 49.5 ---
Credit Agricole CIB 50.0 ---
Credit Suisse 50.5 ---
DekaBank 51.0 ---
Desjardins Group 50.0 0.5%
Deutsche Bank Securities 50.0 1.0%
Deutsche Postbank AG 49.0 ---
Fact & Opinion Economics 50.1 0.6%
First Trust Advisors 49.9 0.7%
FTN Financial 50.2 ---
Goldman, Sachs & Co. 51.0 0.7%
Helaba 50.0 ---
HSBC Markets 50.1 0.4%
Hugh Johnson Advisors 50.8 ---
IDEAglobal 51.0 0.5%
IHS Global Insight 52.0 0.9%
Informa Global Markets 50.5 0.3%
ING Financial Markets 48.0 0.5%
Insight Economics 50.5 0.6%
Intesa Sanpaolo 49.7 ---
J.P. Morgan Chase 50.5 0.9%
Jefferies & Co. 51.0 0.5%
Landesbank Berlin 51.0 0.2%
Maria Fiorini Ramirez 50.0 ---
MET Capital Advisors 49.8 ---
Modal Asset 50.5 ---
Moody’s Analytics 50.0 0.8%
Morgan Stanley & Co. 50.5 0.4%
National Bank Financial 50.5 ---
Natixis 49.5 ---
Nomura Securities 51.8 ---
Nord/LB 50.5 ---
OSK Group/DMG 51.0 ---
Pierpont Securities 50.5 ---
PineBridge Investments 51.0 1.0%
Prestige Economics 50.7 ---
Raiffeisenbank International 50.5 ---
Raymond James 51.2 0.5%
RBC Capital Markets 49.2 ---
RBS Securities 50.3 ---
Regions Financial 50.3 0.8%
Renaissance Macro Research 50.0 ---
Scotiabank 51.0 0.5%
SMBC Nikko Securities 50.0 0.3%
Societe Generale 52.0 0.5%
Southern Polytechnic State 49.0 ---
Standard Chartered 50.5 ---
Stone & McCarthy 50.0 1.0%
TD Securities 50.3 1.5%
UBS 51.0 1.0%
University of Maryland 51.0 0.8%
Wells Fargo & Co. 51.0 0.3%
Westpac Banking Co. 51.0 0.8%
Wrightson ICAP 50.5 0.6%
=============================================
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
Manufacturing in U.S. Probably expanded After Three-Year Low
Jeff Kowalsky/Bloomberg
Nationwide, American manufacturers are more optimistic about the outlook for sales and spending this year than service providers, signaling that factories will support the economic expansion after they slumped in recent months, according to a survey released Dec. 11 by the ISM group.
Nationwide, American manufacturers are more optimistic about the outlook for sales and spending this year than service providers, signaling that factories will support the economic expansion after they slumped in recent months, according to a survey released Dec. 11 by the ISM group. Photographer: Jeff Kowalsky/Bloomberg
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