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U.S. Manufacturing, Household Spending Probably Rose

Manufacturing in U.S. Probably Expanded
A pre-production 2013 Dodge Dart inside the manufacturing engineering metrology lab, at the Chrysler assembly plant in Belvidere, Illinois. Photographer: Daniel Acker/Bloomberg

Manufacturing probably picked up in the U.S. in March, showing it is weathering a slowdown in global growth, economists said before a report today.

The Institute for Supply Management’s factory index climbed to 53 from 52.4 in February, according to a median estimate of 55 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. Construction spending rose in February, other data may show.

“Manufacturers are benefiting from a variety of positive catalysts, including the need to replace a fleet of motor vehicles,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “And we just haven’t got back to the previous peak in inventory that should benefit the sector and the national economy for some time.”

Increased auto sales, sustained corporate purchases of equipment and inventory rebuilding are underpinning the industry that led the U.S. out of the recession more than two years ago. At the same time, less demand from overseas customers remains a risk for manufacturers, which account for about 12 percent of the economy.

The Tempe, Arizona-based ISM’s manufacturing report is due at 10 a.m. New York time. Estimates ranged from 51.7 to 54.5. The gauge averaged 55.2 in 2011 and 57.3 a year earlier.

Also at 10 a.m., the Commerce Department will release data on construction spending. Economists project a 0.7 percent gain after a 0.1 percent January decrease, according to the Bloomberg survey median. Forecasts ranged from a drop of 0.6 percent to an increase of 1.5 percent.

Regional Data

Regional reports reinforce the strength of manufacturing. New York-area factories grew in March at the fastest rate since June 2010 and manufacturing in the Philadelphia region expanded the most in almost a year, figures from the Federal Reserve showed.

While companies are investing in new equipment, a stronger labor market is giving households the means to purchase big-ticket items, benefiting companies like motor-home maker Winnebago Industries Inc.

“We’re beginning to see positive signs that the economy is improving,” Randy Potts, chief executive officer of the Forest City, Iowa-based company, said on a March 15 conference call. “Consumer confidence has been trending higher and the jobless rate is improving.”

Manufacturing shares have outperformed the market. The Standard & Poor’s Supercomposite Industrial Machinery Index, which includes Caterpillar Inc. and Deere & Co., advanced 16 percent since the end of 2011 through March 30, compared with a 12 percent increase in the broader S&P 500.

Auto Sales

Light-vehicle sales in March, set for release tomorrow, may have run at a 14.6 million seasonally adjusted annual rate, the average estimate of analysts surveyed by Bloomberg. It would cap the strongest quarter since the first three months of 2008, according to Ward’s Automotive Group statistics.

A report last week showed orders for non-defense capital goods excluding aircraft -- a proxy for business investment in items such as computers, engines and communications gear -- increased 1.2 percent in February.

Business spending on equipment and software climbed at a 7.5 percent pace in the final three months of 2011 after a 16.2 percent surge in the prior quarter, according to the latest Commerce Department data on gross domestic product.

The growth helps explain why companies like Deere & Co. are expanding. The world’s largest maker of agricultural equipment said March 1 that it would invest $70 million to expand tractor production in Waterloo, Iowa.

Fed’s Bernanke

Federal Reserve Chairman Ben S. Bernanke said last week that while he was encouraged by the recent decline in the unemployment rate, a further reduction will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies,” he said.

Recent “better news” on the U.S. economy has also included strength in manufacturing, Bernanke said. The improvement could contribute to higher consumer confidence and lead to a self-sustaining recovery, he said. “We haven’t seen that in a persuasive way yet,” Bernanke said in a speech in Arlington, Virginia.

                        Bloomberg Survey

                         Construct      ISM
                          Spending     Manu
                              MOM%    Index

Date of Release              04/02    04/02
Observation Period            Feb.    March
Median                        0.7%     53.0
Average                       0.7%     53.1
High Forecast                 1.5%     54.5
Low Forecast                 -0.6%     51.7
Number of Participants          35       55
Previous                     -0.1%     52.4
4CAST Ltd.                    ---      53.0
ABN Amro Inc.                 ---      53.5
Action Economics              1.0%     53.5
Ameriprise Financial Inc      0.8%     53.0
Bantleon Bank AG              ---      53.7
Barclays Capital              0.5%     53.0
BMO Capital Markets           1.0%     53.5
BNP Paribas                   ---      53.3
BofA Merrill Lynch Resear     0.5%     52.5
Capital Economics             1.5%     54.0
Citi                          0.7%     52.5
ClearView Economics           0.5%     53.0
Comerica Inc                  0.5%     53.0
Commerzbank AG                ---      53.0
Credit Suisse                 ---      52.5
Desjardins Group              0.5%     54.5
Deutsche Bank Securities      1.1%     53.5
Deutsche Postbank AG          ---      52.8
First Trust Advisors          0.8%     52.2
HSBC Markets                  0.6%     52.5
Hugh Johnson Advisors         ---      54.0
IDEAglobal                    0.6%     54.0
IHS Global Insight            0.3%     54.0
Informa Global Markets        1.0%     54.0
ING Financial Markets         0.6%     53.0
Insight Economics             1.0%     53.0
Intesa Sanpaulo               0.8%     52.4
Janney Montgomery Scott L     ---      54.2
Jefferies & Co.               1.0%     53.5
Maria Fiorini Ramirez Inc     ---      53.5
MET Capital Advisors          ---      51.7
Moody’s Analytics             1.0%     53.1
Morgan Stanley & Co.          0.7%     52.4
National Bank Financial       ---      52.5
Natixis                       ---      53.0
Newedge                       ---      53.0
Nomura Securities Intl.       ---      51.9
OSK Group/DMG                 ---      52.8
Parthenon Group               0.2%     53.2
Pierpont Securities LLC       ---      54.0
PineBridge Investments       -0.6%     52.0
Raiffeisenbank Internatio     ---      53.0
RBC Capital Markets           ---      52.0
SMBC Nikko Securities         0.3%     52.5
Societe Generale              0.7%     53.5
Standard & Poor’s             1.0%     53.5
Standard Chartered            ---      53.1
Stone & McCarthy Research     0.4%     54.0
TD Securities                 1.0%     53.8
UBS                           1.1%     53.5
University of Maryland        0.8%     53.4
Wells Fargo & Co.             1.0%     52.8
WestLB AG                     0.8%     53.5
Westpac Banking Co.           0.3%     52.0
Wrightson ICAP                0.1%     53.5

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