US factory growth probably near 13-month high
Tuesday, 10 July 2007
Shobhana Chandra
U.S. manufacturing growth in June probably stayed close to the highest level in 13 months, a sign demand is picking up as businesses replenish stockpiles, economists said before a report today.
The Institute for Supply Management's manufacturing index stayed at 55 for a second month, according to the median of 70 forecasts in a Bloomberg News survey. Readings greater than 50 signal expansion.
Improvement in manufacturing will help the economy to strengthen during the rest of the year as declines in homebuilding gradually exert less of a drag on growth, economists said. Manufacturers are expanding to meet demand and rebuild inventories after drawing them down in prior months.
``The rebound in manufacturing will be sustained,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Business investment will show a big bounce back. We see a healthy economy with continued growth into 2008.''
The Tempe, Arizona-based group's report is scheduled to be released at 10 a.m. New York time. Forecasts ranged from 52 to 56.5. Manufacturing accounts for about 12 percent of the economy.
Federal Reserve policy makers kept the benchmark U.S. interest rate at 5.25 percent last week and reiterated the economy is likely to expand at a ``moderate pace.''
The economy grew at a 0.7 percent pace in the first quarter, the slowest in four years, the Commerce Department reported last week. Companies reduced stockpiles at a $4.2 billion rate in the first three months of the year, cutting almost one percentage point from growth.
More recent figures suggest companies have trimmed stockpiles to a satisfactory level and are now gearing up for higher orders. As companies step up spending, the economy will accelerate, even with housing remaining a burden on growth and consumer spending moderating, economists said.
While government figures showed orders for durable goods such as cars and refrigerators dropped more than forecast in May, raising concern about the recovery in manufacturing, other regional reports for June were more optimistic.
The National Association of Purchasing Management-Chicago's measure of business activity held near a two-year high in June, the group reported last week.
Manufacturing in the Philadelphia region accelerated in June at the fastest pace in more than two years as orders surged, the Fed Bank of Philadelphia said June 21. Factories in New York state expanded at the fastest rate in a year last month, the Fed Bank of New York said June 15.
United Technologies Corp.'s Pratt & Whitney unit, the world's second-biggest jet engine maker, last month won an order valued at as much as $1 billion from Spain's Grupo Marsans for engines and service for Airbus SAS's A330.
Some firms aren't faring so well. Schulman Inc., a maker of specialty plastics, on June 12 cut its 2007 profit forecast for the second time this year as demand in Europe and North America declined.
``The markets in both Europe and North America have continued to be very difficult,'' Chief Executive Officer Terry L. Haines said in a statement. ``We are disappointed that we are not seeing the kind of recovery we were expecting.''
Bloomberg
U.S. manufacturing growth in June probably stayed close to the highest level in 13 months, a sign demand is picking up as businesses replenish stockpiles, economists said before a report today.
The Institute for Supply Management's manufacturing index stayed at 55 for a second month, according to the median of 70 forecasts in a Bloomberg News survey. Readings greater than 50 signal expansion.
Improvement in manufacturing will help the economy to strengthen during the rest of the year as declines in homebuilding gradually exert less of a drag on growth, economists said. Manufacturers are expanding to meet demand and rebuild inventories after drawing them down in prior months.
``The rebound in manufacturing will be sustained,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina. ``Business investment will show a big bounce back. We see a healthy economy with continued growth into 2008.''
The Tempe, Arizona-based group's report is scheduled to be released at 10 a.m. New York time. Forecasts ranged from 52 to 56.5. Manufacturing accounts for about 12 percent of the economy.
Federal Reserve policy makers kept the benchmark U.S. interest rate at 5.25 percent last week and reiterated the economy is likely to expand at a ``moderate pace.''
The economy grew at a 0.7 percent pace in the first quarter, the slowest in four years, the Commerce Department reported last week. Companies reduced stockpiles at a $4.2 billion rate in the first three months of the year, cutting almost one percentage point from growth.
More recent figures suggest companies have trimmed stockpiles to a satisfactory level and are now gearing up for higher orders. As companies step up spending, the economy will accelerate, even with housing remaining a burden on growth and consumer spending moderating, economists said.
While government figures showed orders for durable goods such as cars and refrigerators dropped more than forecast in May, raising concern about the recovery in manufacturing, other regional reports for June were more optimistic.
The National Association of Purchasing Management-Chicago's measure of business activity held near a two-year high in June, the group reported last week.
Manufacturing in the Philadelphia region accelerated in June at the fastest pace in more than two years as orders surged, the Fed Bank of Philadelphia said June 21. Factories in New York state expanded at the fastest rate in a year last month, the Fed Bank of New York said June 15.
United Technologies Corp.'s Pratt & Whitney unit, the world's second-biggest jet engine maker, last month won an order valued at as much as $1 billion from Spain's Grupo Marsans for engines and service for Airbus SAS's A330.
Some firms aren't faring so well. Schulman Inc., a maker of specialty plastics, on June 12 cut its 2007 profit forecast for the second time this year as demand in Europe and North America declined.
``The markets in both Europe and North America have continued to be very difficult,'' Chief Executive Officer Terry L. Haines said in a statement. ``We are disappointed that we are not seeing the kind of recovery we were expecting.''
Bloomberg