Manufacturing in U.S. probably grew at fastest pace since 2004

March 2, 2011 - 0:0

Manufacturing in the U.S. probably grew in February at the fastest pace in almost seven years, indicating factories are providing more momentum for the expansion, economists said before a report on Tuesday.

The Institute for Supply Management’s factory index rose last month to 61, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey. Readings greater than 50 signal growth. Other data may show construction spending fell 0.4 percent in January.
Business investment in new equipment is prompting companies like Eaton Corp. and Deere & Co. to raise profit forecasts as the global economy expands. Federal Reserve Chairman Ben S. Bernanke, may reiterate that policy makers are concerned about the pace of recovery and the time it’s taking to reduce unemployment even as manufacturing prospers.
“Manufacturing remains one of the undeniable bright spots in the economy,” said David Semmens, a U.S. economist at Standard Chartered Bank in New York. “We’re looking for hiring to pickup this year and we are looking for it to be investment- led. People don’t buy these machines to leave them idle.”
The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates of the 77 economists in the Bloomberg survey ranged from 58.7 to 63.3.
Also at 10 a.m., the Commerce Department in Washington will release data on construction spending. Projections in the Bloomberg survey of 49 economists ranged from a drop of 2 percent to a gain of 0.8 percent, following a 2.5 percent decline in December.
Regional Manufacturing Recent regional factory reports underscore the strength of manufacturing at the start of the year. The Institute for Supply Management-Chicago Inc. said on Monday that its business barometer rose in February to the highest level since July 1988.
The Fed Bank of New York on Feb. 15 reported manufacturing accelerated in that region in February, while the Philadelphia Fed said two days later that factories in its area expanded at the fastest pace since January 2004.
The strength in manufacturing has been reflected in higher share prices. The Standard & Poor’s Supercomposite Industrial Machinery Index, which includes Caterpillar Inc. and Deere, has climbed 47 percent in the past 12 months, compared with a 19 percent increase in the broader S&P 500.
Manufacturing, which accounts for about 11 percent of the world’s largest economy, led the recovery from the recession that ended in June 2009 as businesses rebuilt stockpiles slashed during the slump that began in December 2007. Rising exports have also spurred production.
(Source: Bloomberg)