Bloomberg News

Manufacturing in U.S. Probably Made Little Progress in May

June 03, 2013

Manufacturing in U.S. Probably Made Little Progress in May

An employee pulls out glowing hot propeller clamps after they were tempered and heat treated inside Hartzell Propeller Inc.'s manufacturing facility in Piqua, Ohio. Photographer: Ty Wright/Bloomberg

Manufacturing in the U.S. probably made little progress in May, indicating the industry will provide scant support for the world’s largest economy, economists said before a report today.

The Institute for Supply Management’s factory index held at 50.7 during the month, matching the weakest this year, according to the median forecast in a Bloomberg survey of 71 economists. Fifty is the dividing line between expansion and contraction. Construction outlays rebounded in April, other figures may show.

Factory activity has waned since reaching an almost two-year high in February as across-the-board federal budget cuts took hold and overseas markets struggled to improve. At the same time, demand for automobiles, the rebound in residential construction and lean inventories may spark a pickup in orders and production in the second half of the year.

“It’s a pause in manufacturing,” said Brian Jones, a senior U.S. economist for Societe Generale in New York. “There is still domestic demand. The housing recovery is continuing, and in fact, accelerating. Manufacturing isn’t likely to go down a lot.”

The Tempe, Arizona-based ISM group’s index is due at 10 a.m. New York time. Economists’ estimates in the Bloomberg survey ranged from 49 to 53.

Also at 10 a.m., the Commerce Department may report that construction spending rose 0.9 percent in April, according to economists surveyed by Bloomberg. Forecasts ranged from a decline of 5.1 percent to a rise of 1.7 percent. The prior month’s 1.7 percent drop reflected a plunge in government projects.

Construction Projects

One area of construction that remains a bright spot is residential real-estate as borrowing costs near a record low attract buyers and encourage more projects.

Manufacturing, which accounts for about 12 percent of the economy, is finding support from the housing rebound as demand picks up for everything from machinery to furniture, appliances and home-decor items.

Automobile purchases may help keep assembly lines running as households use low borrowing costs to replace older vehicles. May sales, also due today, may show purchases of cars and light trucks improved from a 14.9 million annual rate in April, according to economists surveyed.

Rockwell Automation Inc. (ROST:US), a Milwaukee, Wisconsin-based maker of factory automation software, is benefiting as businesses strive to improve productivity and reduce costs.

Auto Demand

Among regions, “the U.S. and Canada are stable and we continue to see investments across most industries,” Chief Executive Officer Keith Nosbusch said during a May 31 conference presentation. “Automotive looks solid for the next several quarters” and capital spending in consumer-related industries is “stable,” he said.

Manufacturing shares are trailing the overall market. The Standard & Poor’s Supercomposite Machinery Index has advanced 9.7 percent so far this year, compared with a 14.3 percent gain in the broader S&P 500 (SPX) measure.

Regional manufacturing reports were mixed for May. The MNI Chicago Report’s business barometer jumped to the highest level since March 2012, with orders, factory employment and production accelerating from April. The Federal Reserve Bank of New York’s so-called Empire State measure and the Federal Reserve Bank of Philadelphia’s index showed manufacturing unexpectedly shrank.

Gross domestic product rose at a 2.4 percent annualized rate in the first three months of 2013, figures showed last week. While inventory accumulation was slower than initially estimated, providing less of a boost to the economy, it sets the stage for continued growth this quarter as higher sales may prompt more stockpiling.

                      Bloomberg Survey

======================================================
                         Construct      ISM      ISM
                          Spending     Manu   Prices
                              MOM%    Index    Index
======================================================

Date of Release              06/03    06/03    06/03
Observation Period           April      May      May
-----------------------------------------------------
Median                        0.9%     50.7     49.5
Average                       0.7%     50.9     49.0
High Forecast                 1.7%     53.0     51.0
Low Forecast                 -5.1%     49.0     45.0
Number of Participants          42       71       10
Previous                     -1.7%     50.7     50.0
-----------------------------------------------------
4CAST                         0.7%     51.0     ---
ABN Amro                      ---      50.5     ---
Action Economics              0.9%     50.5     50.0
Ameriprise Financial          1.2%     50.5     51.0
Banca Aletti                  ---      49.7     50.0
Bank of the West              0.9%     50.3     ---
Banorte-IXE                   ---      51.0     ---
Bantleon Bank AG              ---      50.4     ---
Barclays                      0.3%     51.5     ---
Bayerische Landesbank         ---      50.4     ---
BMO Capital Markets           1.0%     50.5     ---
BNP Paribas                   0.0%     51.0     ---
BofA Merrill Lynch            0.6%     49.5     ---
Briefing.com                  0.5%     49.5     ---
Capital Economics             1.0%     50.5     ---
CIBC World Markets            ---      52.0     ---
Citi                          0.3%     52.0     ---
ClearView Economics           1.0%     51.5     47.0
Comerica                      0.9%     51.0     ---
Commerzbank AG                ---      50.0     ---
Credit Agricole CIB           ---      50.7     ---
Credit Suisse                 ---      52.0     50.0
CTI Capital                   ---      51.6     ---
Danske Bank A/S               ---      51.2     49.5
DekaBank                      1.2%     51.5     ---
Desjardins Group              1.0%     50.3     ---
Deutsche Bank Securities      0.0%     53.0     ---
Deutsche Postbank AG          ---      50.2     ---
DZ Bank                       ---      50.9     ---
First Trust Advisors          1.1%     51.9     ---
HSBC Markets                  1.7%     51.2     45.0
IHS Global Insight           -0.3%     49.9     ---
Informa Global Markets        0.9%     51.0     ---
Intesa Sanpaolo               0.6%     50.4     ---
Janney Montgomery Scott       ---      49.0     ---
Jefferies                     0.6%     50.5     ---
John Hancock Financial        0.5%     50.7     ---
Landesbank Berlin             1.5%     50.5     ---
Landesbank BW                 1.5%     50.0     ---
Lloyds Tsb Bank               0.6%     51.2     ---
Maria Fiorini Ramirez         ---      51.0     ---
MET Capital Advisors          ---      50.2     ---
Modal Asset                   ---      51.8     ---
Moody’s Analytics             0.8%     50.0     ---
Morgan Stanley                0.1%     51.2     ---
National Bank Financial       ---      50.2     ---
Natixis                       ---      51.0     ---
Nomura Securities             ---      50.4     ---
Nord/LB                       0.6%     50.5     49.5
OSK Group/DMG                 ---      50.7     ---
Oxford Economics              0.5%     51.2     ---
Pierpont Securities           ---      50.5     ---
PNC Bank                     -5.1%     51.0     ---
Prestige Economics            ---      51.2     ---
Raiffeisenbank International  ---      52.5     ---
Raymond James                 1.5%     52.5     ---
RBC Capital Markets           ---      53.0     ---
Regions Financial             1.1%     51.4     ---
Renaissance Macro Research    1.0%     50.5     ---
Scotiabank                    0.7%     50.5     ---
SMBC Nikko Securities         1.3%     50.5     ---
Societe Generale              1.0%     51.7     49.0
Southern Polytechnic State    ---      50.5     ---
Standard Chartered Bank       ---      50.0     ---
Stone & McCarthy              0.2%     51.0     ---
TD Securities                 1.0%     51.8     ---
UniCredit Research            ---      50.7     ---
Union Investment              ---      50.2     ---
University of Maryland        1.0%     50.5     49.0
Wells Fargo & Co.             1.3%     51.0     ---
Westpac Banking Co.           0.8%     51.0     ---
======================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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


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Companies Mentioned

  • ROST
    (Ross Stores Inc)
    • $79.97 USD
    • 1.57
    • 1.96%
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