Bloomberg News

Orders Probably Picked Up With Spending: U.S. Economy Preview

March 25, 2012

Wahl Clipper Corp. hair trimmers sit in a box before packaging at the company's production facility in Sterling, Illinois, on Feb. 27, 2012. Manufacturers in the U.S. probably received more orders for durable goods in February and consumer
purchases climbed the most in five months, economists said reports this week will show. Photographer: Daniel Acker/Bloomberg

Wahl Clipper Corp. hair trimmers sit in a box before packaging at the company's production facility in Sterling, Illinois, on Feb. 27, 2012. Manufacturers in the U.S. probably received more orders for durable goods in February and consumer purchases climbed the most in five months, economists said reports this week will show. Photographer: Daniel Acker/Bloomberg

Manufacturers in the U.S. probably received more orders for durable goods in February and consumer purchases climbed the most in five months, economists said reports this week will show.

Bookings for long-lasting factory goods rose 3 percent last month after decreasing 3.7 percent in January, according to the median estimate of 70 economists surveyed by Bloomberg News. Personal spending increased 0.6 percent last month, boosted in part by stronger auto sales.

“It’s employment that’s really driving the bus for spending growth right now,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “As our economy expands, it’s going to allow manufacturing to build right along with it.”

Six months of the strongest job growth since 2006 is helping sustain incomes and spending, just as companies upgrade equipment, keeping the nation’s producers at the forefront of the almost three-year-old expansion. At the same time, higher transportation costs and slowdowns in Europe and China represent hurdles for manufacturing.

The Commerce Department’s report on March 28 is projected to show orders for goods meant to last at least three years climbed for the fourth time in five months, helped by a jump in demand for commercial aircraft. Boeing Co. received orders for 237 airplanes in February from 150 a month earlier, data from the Chicago-based company show.

Minus Transportation

Bookings excluding transportation equipment probably increased 1.7 percent after a 3 percent drop in January, according to the Bloomberg survey.

Machinery and equipment makers have outperformed the broader stock market. The Standard & Poor’s Supercomposite Machinery Index has gained 16 percent so far this year, compared with an 11 percent increase for the S&P 500 Index.

Auto manufacturing has been powering factory growth. Cars last month sold at the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. Light-vehicle sales accelerated to a 15 million annual rate, the strongest since February 2008, according to data from Ward’s Automotive Group.

Car sales help explain the projected February gain in Americans’ spending that followed a 0.2 percent increase the prior month, according to the Bloomberg survey median before the Commerce Department’s figures on March 30. Personal incomes may have increased 0.4 percent.

Consumer Confidence

Employment and income gains helped underpin consumer confidence in March. The Conference Board’s release on March 27 may show its index was little changed at 70 this month after reaching a one-year high of 70.8 in February, the survey median showed. The Thomson Reuters/University of Michigan final March index of consumer sentiment slipped to 74.7 from 75.3 the previous month, according to the survey.

“I believe there is some stability easing back into the marketplace as consumer confidence moves higher in most parts of the world,” Mark Parker, president and chief executive officer of Nike Inc. (NKE), said in a March 22 earnings call.

Beaverton, Oregon-based Nike, the world’s largest sporting- goods company, last week reported third-quarter profit that topped analysts’ estimates as sales gained in North America, even as its margins shrank.

Higher gasoline prices are restraining sentiment. The price of a gallon of regular unleaded gas was $3.89 as of March 22, up 61 cents since the end of last year, according to AAA, the nation’s largest automobile association.

Federal Reserve

Federal Reserve officials said this month that consumer and business spending are helping drive the world’s largest economy.

“Household spending and business fixed investment have continued to advance,” members of the Federal Open Market Committee said this month in a statement. At the same time, they said, “the housing sector remains depressed.”

The S&P/Case-Shiller index of home prices in 20 cities declined 3.8 percent in January from the same month last year after a 4 percent drop in the 12 months through December, economists forecast the March 27 data to show.

                        Bloomberg Survey

================================================================
                        Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Pending Homes MOM%        3/26      Feb.      2.0%      1.0%
Pending Homes YOY%        3/26      Feb.     10.3%      9.7%
Case Shiller Monthly MO   3/27      Jan.     -0.5%     -0.3%
Case Shiller Monthly YO   3/27      Jan.     -4.0%     -3.8%
Case Shiller Monthly In   3/27      Jan.     136.7     135.8
Consumer Conf Index       3/27     March      70.8      70.0
Durables Orders MOM%      3/28      Feb.     -3.7%      3.0%
Durables Ex-Trans MOM%    3/28      Feb.     -3.0%      1.7%
Cap Goods Core MOM%       3/28      Feb.     -3.9%      1.6%
Cap Goods Core Ship MOM   3/28      Feb.     -3.0%      0.9%
Initial Claims ,000’s     3/29     23-Mar     348       350
Cont. Claims ,000’s       3/29     17-Mar     3352      3350
GDP Annual QOQ%           3/29      4Q T      3.0%      3.0%
Personal Consump. QOQ%    3/29      4Q T      2.1%      2.1%
GDP Prices QOQ%           3/29      4Q T      0.9%      0.9%
Core PCE Prices QOQ%      3/29      4Q T      1.3%      1.3%
BCCI                      3/29     26-Mar    -34.9      n/a
Pers Inc MOM%             3/30      Feb.      0.3%      0.4%
Pers Spend MOM%           3/30      Feb.      0.2%      0.6%
PCE Deflator MOM%         3/30      Feb.      0.2%      0.3%
PCE Deflator YOY%         3/30      Feb.      2.4%      2.3%
Core PCE Prices MOM%      3/30      Feb.      0.2%      0.1%
Core PCE Prices YOY%      3/30      Feb.      1.9%      1.9%
Chicago PM Index          3/30     March      64.0      63.0
U of Mich Conf. Index     3/30    March F     75.3      74.7
================================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net


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