Bloomberg Businesweek
By Shobhana Chandra Jan. 3 (Bloomberg) -- Manufacturing in the U.S. probably grew in December at the fastest pace in seven months, reinforcing signs the expansion gained momentum at the end of 2010, economists said before a report today.
The Institute for Supply Management’s factory index rose to 57 from 56.6 the prior month, according to the median estimate of 57 economists surveyed by Bloomberg News. Readings greater than 50 signal growth. A separate report may show construction spending increased 0.2 percent in November. Factory production that was driven by inventory rebuilding at the start of the recovery may now be getting more of a boost from increased spending by American consumers and companies. The national figures follow recent regional data that showed manufacturing will remain a mainstay of the world’s largest economy. “We could see further strengthening in the manufacturing numbers for December,” said Conrad DeQuadros, a senior economist at RDQ Economics LLC in New York. “Manufacturing growth is being driven by a pickup in domestic demand rather than just inventory replenishment. It’s suggestive of a more sustainable recovery.” The Tempe, Arizona-based ISM’s report is due at 10 a.m. New York time. Estimates in the Bloomberg survey ranged from 55 to 60. Also at 10 a.m., the Commerce Department will release data on construction spending. Projections in the Bloomberg survey ranged from a drop of 0.8 percent to a gain of 0.7 percent, following a 0.7 percent increase in October. Regional Manufacturing Recent regional factory reports underscore the resilience of manufacturing at year-end. The Federal Reserve Bank of Philadelphia said Dec. 16 that factories in the region expanded in December at the fastest pace since April 2005. ISM-Chicago data on Dec. 30 showed businesses grew at the quickest pace in two decades. 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 & Co., jumped 47 percent last year, compared with a 13 percent increase in the broader S&P 500. Jabil Circuit Inc., which provides manufacturing services, is one company benefiting from stronger emerging economies such as China and India. St. Petersburg, Florida-based Jabil said Dec. 20 that its revenue rose $4.1 billion in the three months ended Nov. 30, up from $3.1 billion a year earlier. “At this point, in terms of U.S. spending, enterprise spending looks stable,” Timothy Main, chief executive officer of Jabil, said on a teleconference with analysts on Dec. 20. “International spending looks very strong and other areas of enterprise infrastructure are pretty robust.” Increased Exports The manufacturing industry, which accounts for about 11 percent of the economy, led the recovery from the worst recession since the 1930s as businesses rebuilt stockpiles they’d slashed during the slump. Rising exports have also spurred factory output. Further gains in manufacturing may come from a pickup in consumer spending, which accounts for about 70 percent of the U.S. economy. Retailers’ 2010 holiday sales jumped 5.5 percent for the best performance since 2005, according to MasterCard Advisors’ SpendingPulse, which measures sales by all payment forms. The gain was 4.1 percent a year earlier. The numbers include Internet sales and exclude automobile purchases. Economists in December boosted forecasts for fourth-quarter growth, reflecting a pickup in consumer spending and passage of an $858 billion bill extending all Bush-era tax cuts for two years. The legislation also continues expanded unemployment insurance benefits through 2011, trims payrolls taxes and includes accelerated tax depreciation for equipment purchases. Auto Sales Auto dealers are also seeing improved demand. Car sales in November rose to a 12.26 million unit pace, the highest since the government’s cash-for-clunkers program in August 2009, according to industry data. Housing, the industry that precipitated the recession, is still struggling. The projected gain for construction spending in November may reflect more of a boost from ongoing civil projects such as new roads and bridges using funds available as part of the federal stimulus effort.
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