AP News

Ahead of the Bell: US Manufacturing


WASHINGTON (AP) — U.S. manufacturing likely expanded in November at a slightly slower pace than in October. Factory activity may have been weakened by Superstorm Sandy.

Economists forecast that the Institute for Supply Management's manufacturing index slipped to 51.2 from 51.7 in October. The level would be consistent with only modest economic growth.

Readings above 50 indicate expansion.

The ISM will release the report at 10 a.m. Eastern on Monday. The ISM is a trade group of purchasing managers.

The reading may be depressed by Superstorm Sandy, which hit the East Coast on Oct. 29 and affected businesses in 24 states.

Two regional manufacturing surveys released in mid-November showed the storm disrupted factories in the Philadelphia and New York regions. On Friday, the government said Sandy contributed to a decline in consumer spending in October.

Manufacturing grew in October for only the second time since May, buoyed by a jump in new orders and greater production. The details of the report suggested that better consumer spending helped some industries, while weaker business investment slowed others.

Despite the storm and a still-weak economy, consumers remain upbeat. A measure of consumer confidence reached a five-year high in November. More consumer spending could boost factory output.

And a report last week showed that demand for large factory goods recovered a bit after falling sharply over the summer. Orders for industrial machinery and other core capital goods, which reflect business investment plans, rose by the most since May.

But companies and consumers may grow more cautious before the end of the year. Businesses fear large tax increases and big government spending cuts, a combination dubbed the "fiscal cliff," that will kick in next year if Congress fails to reach a budget deal to avert them.

And consumers may also rein in spending out of concern their taxes will increase. Some consumer surveys have shown an increasing awareness of the potential increases.

The economy grew at a 2.7 percent annual rate in the July-September quarter, much better than the 1.3 percent pace in the April-June quarter. But most economists expect growth will slow to below 2 percent in the final three months of the year, mostly because of Sandy and the impact of the fiscal cliff.


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