ISM index of U.S. manufacturing climbs to a five-month high
By Bob Willis Bloomberg News
WASHINGTON - Manufacturing in the U.S. grew in November at the fastest pace in five months, showing factories will keep supporting the economic expansion through the end of the year.
The Institute for Supply Management’s factory index increased to 52.7 last month from 50.8 in October, the Tempe, Ariz.-based group’s data showed Thursday. Readings above 50 indicate expansion, and economists surveyed by Bloomberg News projected a gain to 51.8. Orders and production grew at the fastest pace since April.
Corporate purchases of new equipment, export demand, stronger consumer spending during the holidays and leaner inventories lay the groundwork for a pickup in production. At the same time, risk of recession in Europe may restrain U.S. manufacturing, the industry that spurred the recovery.
“Manufacturing is growing at a moderate pace right now, and the sector that’s helping is autos,” Paul Ballew, chief economist at Nationwide Mutual Insurance Co. in Columbus, Ohio, said before the report. “Unless something tumultuous happens in Europe, the economy should stagger on.”
Estimates for the manufacturing index from 82 economists ranged from 50.2 to 53. While 50 is the midway point between expansion and contraction in the industry, a reading above 42.5 generally indicates an expansion in the overall economy.
Stocks held gains after the figures, with the Standard & Poor’s 500 Index climbing 0.2 percent to 1,249.85 at 10:11 a.m. in New York. The yield on the benchmark 10-year Treasury note rose to 2.12 percent from 2.07 percent late Wednesday.
In China and Europe, manufacturing contracted last month. A purchasing managers’ index compiled by the China Federation of Logistics and Purchasing slid to 49 in November, the weakest since February 2009. Separate reports showed slowing retail sales and an industrial slump in Australia, which relies on China as its biggest export customer.
A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 46.4 from 47.1 in October, London-based Markit Economics said Thursday. That’s the lowest since July 2009. Thursday’s ISM report on the U.S. showed the production index increased to 56.6 in November from 50.1 in October. The new orders measure rose to 56.7 from 52.4, while the group’s gauge of export orders climbed to 52 from 50.
The inventory index rose to 48.3 from 46.7, while a gauge of customer stockpiles increased to 50, the highest since March 2009, from 43.5.
The index of prices paid rose to 45 from 41. The employment index fell to 51.8 from 53.5. Manufacturing payrolls rose by 9,000 last month after a 5,000 gain the prior month, according to a survey of economists surveyed by Bloomberg before the Labor Department’s payroll report Friday.
An approaching deadline to qualify for a larger government tax credit may be contributing to an increase in businesses demand for equipment. The Obama administration’s tax compromise allows companies to depreciate 100 percent of investment in capital outlays in 2011 and 50 percent in 2012.
Automakers are enjoying sales gains as well. U.S. light- vehicle sales jumped in October to their fastest rate since February even as automakers reduced discounts, a sign that more consumers are returning to showrooms.
Industrywide light-vehicle sales ran at a seasonally adjusted annual rate of 13.2 million in October, according to Autodata Corp.
Deere & Co.
Growth in emerging markets is helping sustain demand for U.S.-produced goods. Deere & Co., the world’s largest farm- equipment maker, on Nov. 23 reported fiscal fourth-quarter profit and forecast 2012 earnings that topped analysts’ estimates as U.S. farmers flush with cash buy more tractors and combines.
“Globally, coming off 2011’s high levels, the 2012 industry outlook is for stable commodity prices and farm income,” investor communications manager Susan Karlix said on a conference call. “We expect sound farmer confidence and strong equipment demand.”
Deere introduced a record number of products during fiscal 2011 and announced plans for six new factories in China, Brazil and India, the company said. Net sales of equipment in the U.S. and Canada rose 14 percent in the fiscal fourth quarter and 31 percent in the rest of the world.
A dollar that has lost about 9 percent of its value since June 2010 has made American goods more competitive. August and September were the best months for U.S. exports on record, according to figures from the Commerce Department.
The Federal Reserve yesterday said the U.S. economy expanded at a “moderate” pace in 11 of its 12 districts in October and the first half of November, led by gains in manufacturing and consumer spending. “Hiring was generally subdued” and residential real estate “generally remained sluggish,” the Fed said.