Manufacturing in the U.S. probably expanded in February for a third month as businesses invested more in new equipment, economists said before a report today.
A reading of 52.5 is projected for the Institute for Supply Management’s factory index after a nine-month high of 53.1 in January, according to the median forecast of 81 economists surveyed by Bloomberg. Numbers greater than 50 signal expansion. Other reports today may show consumer spending and construction outlays increased in January.
Manufacturers such as Applied Materials Inc. (AMAT) are emerging from an industry setback in the second half of 2012 as overseas markets stabilize, automobile sales hold up and companies boost capital spending. Further production gains would complement a rebound in the housing market and help underpin the economy amid budget disputes in Washington.
“We’re expecting a little moderation, but that’s not indicative of broad-based weakening in manufacturing,” said Gennadiy Goldberg, a U.S. strategist at TD Securities Inc. in New York, whose forecast matches the survey median. “Business investment going forward is going to be a positive. We’ve seen some of the risk from Europe come off the table, therefore helping manufacturers with export orders. Unfortunately, we keep going from crisis to crisis on the policy front.”
The Tempe, Arizona-based ISM will release its report at 10 a.m. New York time. Estimates ranged from 50.5 to 54. The gauge averaged 51.7 in 2012 and 55.2 in 2011.
Recent regional reports show the industry, which accounts for about 12 percent of the U.S. economy, made gains last month. The Federal Reserve Bank of New York’s general economic index, which covers New York, northern New Jersey and southern Connecticut, unexpectedly expanded in February at the fastest pace in nine months. A report yesterday from MNI Chicago showed that business activity expanded in February by the most in almost a year.
Investment in new equipment is at the root of the recent pickup in increased activity on factory floors. Orders for capital goods, excluding military gear and aircraft, have climbed 9.5 percent since October, the biggest three-month gain since 1993, according to Commerce Department figures released this week.
Applied Materials, the largest producer of chipmaking equipment, forecast fiscal second-quarter sales that beat most estimates, indicating that some customers are expanding output on brisk demand for mobile devices.
Sales in the period will rise 15 percent to 25 percent from the prior quarter, the company said in a statement Feb. 13, indicating revenue of $1.81 billion to $1.97 billion. Analysts on average estimated sales of $1.81 billion, according to data compiled by Bloomberg.
“The momentum in the business is strong,” Michael Splinter, chief executive officer at the Santa Clara, California-based company, said at a conference the following day. “Our display business is starting to come back. Orders are picking up there as well.”
A global economy that is regaining its footing is bolstering business for U.S. producers at the same time Americans keep buying motor vehicles.
Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million a month earlier, according to Ward’s Automotive Group. November through January were the strongest three months of the auto industry in five years.
A report from the Commerce Department today is projected to show consumer spending is holding up. Household purchases advanced 0.2 percent in January for a second month, according to the Bloomberg survey median before the 8:30 a.m. figures in Washington.
A healthier housing market would help fuel further manufacturing gains as consumers purchase durable goods, like furniture and refrigerators, and building products.
Economists project construction spending rose 0.4 percent in January after a 0.9 percent gain the prior month, according to survey median ahead of the 10 a.m. report from the Commerce Department.
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