Tags: Chicago | index | manufacturing | factory

Chicago Index Increases in Sign Manufacturing Improving

Monday, 30 September 2013 10:53 AM

Business activity in the U.S. expanded more than forecast in September, reaching a four-month high and adding to signs of a rebound in manufacturing that will help underpin the world’s biggest economy.

The MNI Chicago Report business barometer rose to 55.7 from 53 in August. Numbers greater than 50 signal expansion. The median forecast of economists in a Bloomberg survey was 54.

Manufacturing, which makes up about 12 percent of the economy, is expanding as demand for automobiles, construction materials and appliances keeps assembly lines busy. A pickup in business investment and overseas market improvement would help sustain gains and support economic growth into 2014.

“It’s one of the positives for the economy,” Mike Englund, chief economist at Action Economics LLC in Boulder, said before the report. “We’re assuming a strong fourth quarter as assembly rates keep rising, the aircraft sector is also posting pretty sizeable gains in production. I think you’ve got a nice floor for the factory sector into year-end.”

Stocks fell, paring a quarterly gain for the Standard & Poor’s 500 Index, as a stalemate over the federal budget increased the likelihood of a U.S. government shutdown. The S&P 500 dropped 0.7 percent to 1,679.43 at 10:02 a.m. in New York.

Estimates of 53 economists in the Bloomberg survey ranged from 52 to 57.1. The index averaged 54.6 in 2012 and 62.8 in 2011.

New Orders

The Chicago group’s gauge of new orders increased to 58.9 this month, the highest since February, from 57.2 in August. The production index jumped to 58, the highest since May, from 53 last month, according to today’s report. A measure of employment fell to a five-month low of 53.2 from 54.9.

Economists monitor the Chicago index and other regional reports for an early reading on the national manufacturing outlook. The Chicago group includes goods producers and service providers with operations in the U.S. and abroad, making the gauge a measure of overall growth.

Other regional factory indexes have showed sustained expansion. The Federal Reserve Bank of New York’s general economic index showed manufacturing expanded in September, though the measure eased to 6.3 from 8.2 last month. Readings greater than zero signal growth in New York, northern New Jersey and southern Connecticut. Factory activity gauged by the Federal Reserve Bank of Philadelphia’s index expanded at the fastest pace since March 2011.

URS Corp., a San Francisco-based provider of engineering, construction and technical work for public agencies and private companies, including facilities maintenance and other services for industrial businesses, has benefited from the rebound in factory activity.

‘Real Turn’

“We see a real resurgence in activity and general manufacturing in the U.S. and we’re seeing more incoming questions about front end engineering design work that would lead, ultimately, to more construction work,” Chief Financial Officer H. Thomas Hicks said in a Sept. 16 presentation. “There is real evidence that there is a real turn in the industrial business in the U.S.”

At the same time, the gains in manufacturing have been uneven. Factory orders have been slow to pick up. Demand for all durable goods, those meant to last at least three years, rose 0.1 percent after plunging 8.1 percent in July.

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Business activity in the U.S. expanded more than forecast in September, reaching a four-month high and adding to signs of a rebound in manufacturing that will help underpin the world's biggest economy.
Monday, 30 September 2013 10:53 AM
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