Tags: Manufacturing | Factory | Economy | United States

Manufacturing Cools From Strongest Pace in Three Years

Wednesday, 01 October 2014 10:16 AM

Manufacturing cooled in September following the strongest rate of growth in three years as U.S. factories settled into a more sustainable expansion that will spur the economy.

While the Institute for Supply Management’s index dropped to 56.6 from 59 in August, the gauge’s average over the past three months was the highest since early 2011, figures from the Tempe, Arizona-based group showed. The median forecast in a Bloomberg survey of 84 economists called for a decline to 58.5.

Rising sales at automakers such as Ford Motor Co. and growing corporate orders for equipment are keeping the nation’s assembly lines busy. Improving consumer and business spending are bolstering American factories at a time global markets from China to Europe show few signs of gaining traction.

“The manufacturing outlook looks pretty good,” Thomas Simons, a money market economist at Jefferies LLC in New York, said before the report. “Auto demand seems to be accelerating and that supports the idea that production will continue to chug along. The third quarter is looking pretty solid.”

Economists’ estimates in the Bloomberg survey ranged from 57 to 60. Readings greater than 50 indicate growth.

The ISM group’s factory employment measure decreased to 54.6 in September, from 58.1 a month earlier.

The new orders gauge declined to 60 last month from a 66.7 reading that was the highest since 2004.

Factory Production

The ISM measure of production advanced to 64.6, the highest since May 2010, from 64.5 the prior month. The index for orders waiting to be filled decreased to 47 from 52.5.

Measures of factory and customer inventories fell from a month, while an index of prices paid climbed.

The figures follow Commerce Department data last week that showed the economy expanded in the second quarter at a revised 4.6 percent annualized pace, the fastest since the last three months of 2011.

Consumer spending, which accounts for almost 70 percent of the economy, is underpinning growth. Purchases rebounded 0.5 percent in August following little change in July, a report showed this week. Incomes grew 0.3 percent as wages and salaries climbed the most in three months.

Demand for automobiles has been resilient. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to Ward’s Automotive Group. Company reports showed results at Ford, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. surpassed analysts’ projections.

Second Half

“The recent economic indicators remain very favorable,” Emily Kolinski Morris, senior U.S. economist at Dearborn, Michigan-based Ford, said on a Sept. 3 conference call with analysts. That “should provide positive momentum for the economy as we continue in the second half.”

A strengthening job market is helping lift demand. A report in two days may show the economy added almost 220,000 jobs in September after 142,000 the prior month, according to the median forecast in a Bloomberg survey. The unemployment rate may have held at 6.1 percent, they predicted.

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Manufacturing cooled in September following the strongest rate of growth in three years as U.S. factories settled into a more sustainable expansion that will spur the economy.
Manufacturing, Factory, Economy, United States
Wednesday, 01 October 2014 10:16 AM
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