Tags: economy | us | spending | consumer | manufacturing | jobless | unemployment

Manufacturing, Spending Data Out This Week

Sunday, 26 September 2010 02:11 PM

Manufacturing probably cooled in September and consumer spending stabilized last month, underscoring the Federal Reserve’s forecast of “modest” U.S. growth in coming months, economists said before reports this week.

The Institute for Supply Management’s factory index fell to 54.5 from 56.3 in August, according to the median of 63 forecasts in a Bloomberg survey ahead of Friday's report. Household purchases rose 0.4 percent last month, the same as in July, Commerce Department figures may show.

Companies such as Cisco Systems Inc. are seeing a “bumpy” recovery that will limit gains in business investment and hiring, restraining the manufacturing rebound that helped the U.S. recover from the worst recession since the 1930s. A jobless rate hovering close to 10 percent is shaking consumer confidence and shackling spending, the biggest part of the economy.

“The manufacturing sector is still reasonably healthy, but it’s certainly decelerated,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “We need to see a pickup in hiring to drive faster income growth and lead to acceleration in consumer spending,” or else “we’re doomed to this sub-par growth.”

A reading above 50 signals growth for the Tempe, Arizona- based ISM’s gauge. The index averaged 53.2 during the expansion that ended in December 2007.

Fed’s View

“The pace of economic recovery is likely to be modest in the near term,” Fed policy makers said last week after their latest meeting. The central bank announced it was willing to take additional steps to maintain the recovery and prevent inflation from slowing further if needed.

Cisco Chief Executive Officer John Chambers said last week in an interview on Bloomberg Television’s “InBusiness With Margaret Brennan” that economic conditions appeared “a little bit bumpy.”

The San Jose, California-based company “saw the market returning to more normal growth rates,” he said. Most chief executives Cisco talks to are projecting U.S. growth of 2 percent or less, he said, “and that means they’ll probably spend appropriately and also hire appropriately.”

Even so, Chambers added, “Asia’s still going strong and Europe is holding up remarkably well.” Cisco is the world’s largest maker of networking equipment.

Manufacturers Outperform

Manufacturing shares are outperforming the broader market. The Standard & Poor’s Supercomposite Machinery Index, which includes companies like Caterpillar Inc. and Moline, Illinois- based Deere & Co. is up 24 percent so far this year. The broader S&P 500 Index is up 3 percent.

The Commerce Department’s Friday spending report will also show personal income rose 0.3 percent in August after a 0.2 percent gain the prior month, according to economists surveyed.

With unemployment forecast to hover at 9.6 percent in the second half, housing prices declining and credit contracting, consumer spending will probably be slow to strengthen.

The New York-based Conference Board’s consumer confidence index fell to 52.3 in September from 53.5 a month earlier, according to economists surveyed before Tuesday's report. That’s even lower than the 53.7 average during the recession that ended in June 2009.

The Reuters/University of Michigan sentiment gauge, Friday, fell to 67 this month from 68.9 at the end of August, the survey showed.

Home Values Fall

Home prices dropped as the effects of a government tax credit abated. The S&P/Case Shiller 20-city home price index fell 0.1 percent in July, the first decline in four months, according to the survey median ahead of Tuesday's report. In the 12 months ended July, home values probably rose 3.1 percent, down from a 4.2 percent gain in the year ended June.

Another report from the Commerce Department on Friday may show construction spending fell 0.4 percent in August after a 1 percent decline the prior month, economists forecast.

On Thursday, jobless claims will continue to reflect a labor market that is slow to improve. The number of applications for unemployment benefits probably fell to 460,000 last week from 465,000 a week earlier, according to the median estimate of economists surveyed before the Labor Department’s report.

Lastly, the government’s report on second-quarter gross domestic product, also due Thursday, may show the world’s largest economy expanded at a 1.6 percent annual rate, unchanged from the prior estimate, according to the survey median.

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Manufacturing probably cooled in September and consumer spending stabilized last month, underscoring the Federal Reserve s forecast of modest U.S. growth in coming months, economists said before reports this week.The Institute for Supply Management s factory index fell to...
Sunday, 26 September 2010 02:11 PM
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