U.S. Economy: Manufacturing Unexpectedly Accelerates
July 1 (Bloomberg) -- U.S. manufacturing unexpectedly accelerated in June, supporting the Federal Reserve's forecast that the economy will strengthen in the second half of 2011.
The Institute for Supply Management's factory index rose to 55.3, the first gain in four months, from 53.5 in May, the Tempe, Arizona-based group said today. Economists projected a decrease to 52, according to the median forecast in a Bloomberg News survey. Figures greater than 50 signal expansion.
Stocks climbed for a fifth day on signs manufacturing is rebounding from higher commodities costs and shortages of parts caused by the earthquake in Japan. As emerging markets power sales at companies like Parker Hannifin Corp., bigger job gains may be needed to boost confidence among U.S. consumers, whose spending accounts for 70 percent of the economy.
"The Fed is counting on growth to reaccelerate in the second half, and to that extent the manufacturing report is encouraging," said James O'Sullivan, chief economist at MF Global Inc. in New York. "To be more confident about the economy in the second half, we need a renewed upward turn in the labor market."
The Standard & Poor's 500 Index climbed 1.4 percent to 1,339.67 at the 4 p.m. close in New York, extending a weekly rally to 5.6 percent, the most since July 2009. Treasuries fell, pushing up the yield on the benchmark 10-year note up to 3.19 percent from 3.16 percent late yesterday.
A measure of consumer confidence fell more than projected in June, and construction spending in May dropped for a sixth straight month as the housing market remained a hurdle for the expansion, other reports today showed.
Inventories Grow
Estimates for the manufacturing index from 77 economists in the Bloomberg survey ranged from 49 to 55. The supply managers' report showed factory inventories grew in June at the fastest pace since November. Measures of production, new orders and employment rose at a slower pace.
"We're not looking at robust recovery period here, but through thick and thin it's being sustained," Bradley Holcomb, chairman of the Institute for Supply Management's factory survey committee, said during a conference call with reporters. "Everybody's cautious."
The data are at odds with other figures today that showed manufacturing growth is slowing from China to Europe. China's factory index fell in June to the weakest level since February 2009, while in the 17-nation euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the slowest pace in 17 months, while Italy, Ireland, Spain and Greece contracted.
Confidence among U.S. consumers declined in June. The Thomson Reuters/University of Michigan said today its final index of sentiment fell to 71.5 from 74.3 in May.
Construction Spending
The Commerce Department reported that construction spending in May dropped for a sixth straight month. The 0.6 percent decrease matched the previous month's decline, which was initially reported as a gain.
Economic growth in the U.S. slowed to a 1.9 percent annual pace in the first quarter from 3.1 percent in the previous three months. Employers added 54,000 workers to their payrolls in May, the smallest number in eight months.
Fed policy makers attributed some of the slowdown in the first half of the year to "factors that are likely to be temporary."
"The effects of the Japanese disaster on manufacturing output are likely to dissipate in coming months," Fed Chairman Ben S. Bernanke told reporters on June 22 after the Fed's two- day policy meeting.
Reports last month suggest supply problems may be starting to ease. U.S. factory output climbed 0.4 percent in May on rising demand for machinery and computers, Fed data showed June 15.
Japanese Production
In Japan, industrial production increased in May by the most since 1953, led by carmakers that restored operations, government figures showed June 29.
Even with the earthquake, unrest in the Middle East and higher commodity prices, manufacturing "has been the rock in the system," Thomas L. Williams, chief operating officer at Parker Hannifin, said June 16 at a conference in Chicago. "I still feel that way. I'm not worried about a double-dip recession as far as what I'm seeing."
The Cleveland-based maker of components used in construction equipment and aircraft is focusing on growth in Asia, where it is on track to triple sales to $3 billion, Williams said.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
Find out more about Bloomberg for iPad: http://m.bloomberg.com/ipad/
No comments:
Post a Comment
Please comment as you wish and share this if you like :)