Manufacturing in the U.S. probably grew in November at the fastest pace in five months, showing factories will keep supporting the economic expansion through the end of the year, economists said before a report today.
The Institute for Supply Management’s factory index rose to 51.8 last month from 50.8 in October, economists surveyed by Bloomberg News forecast the Tempe, Arizona-based group’s data showed today. Fifty is the dividing line between growth and contraction. Jobless claims fell last week and construction spending increased in October, other data may show.
Corporate investment on new equipment, export demand, stronger consumer purchases 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.
“Demand for manufactured goods has remained pretty resilient over the last couple of months,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. Nonetheless, global “growth is starting to slow and this could have a moderating impact on U.S. manufacturing, at least over the intermediate-term,” he said.
The Tempe, Arizona-based group’s data is due at 10 a.m. Estimates for the manufacturing index from 82 economists ranged from 50.2 to 53. A reading above 42.5 generally indicates an expansion in the overall economy, the group has said.
China, Europe
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 today. That’s the lowest since July 2009.
The national ISM report follows data yesterday showing business activity grew in November at the fastest pace in seven months. The Institute for Supply Management-Chicago Inc. said its business barometer increased to 62.6 from 58.4 in October as orders and production strengthened.
Optimism the U.S. economy will avoid recession, along with efforts by six central banks to ease Europe’s debt crisis, sparked a stock-market rally yesterday. The Standard & Poor’s 500 Index jumped 4.3 percent, a third straight gain.
Tax Credit
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 climbed 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.
Growth in emerging markets is helping sustain demand for U.S.-produced goods. Deere & Co. (DE), 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.
Deere & Co.
“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 (DXY) 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.
Federal Reserve
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.
The Labor Department today may report initial jobless claims fell to 390,000 last week from 393,000 the prior week, according to the median estimate in the Bloomberg survey ahead of the 8:30 a.m. report.
Construction spending increased in October for a third month, economists forecast that Commerce Department figures may show at 10 a.m. Outlays increased 0.3 percent after rising 0.2 percent in September, according to the median projection.
Bloomberg Survey
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Initial ISM ISM Construct
Claims Manu Prices Spending
,000’s Index Index MOM%
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Date of Release 12/01 12/01 12/01 12/01
Observation Period 26-Nov Nov. Nov. Oct.
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Median 390 51.8 45.0 0.3%
Average 392 51.6 45.9 0.3%
High Forecast 415 53.0 52.0 1.0%
Low Forecast 380 50.2 43.0 -0.7%
Number of Participants 43 82 17 52
Previous 393 50.8 41.0 0.2%
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4CAST 392 52.5 --- -0.1%
ABN Amro 390 51.0 --- ---
Action Economics 390 51.5 45.0 0.7%
Aletti Gestielle --- 51.2 44.0 ---
Ameriprise Financial 390 52.5 45.0 0.4%
Banca Aletti --- 50.8 45.0 ---
Banesto --- 51.8 --- 0.3%
Bank of Tokyo-Mitsubishi 390 52.0 --- 0.0%
Bantleon Bank AG --- 51.7 --- ---
Barclays Capital 390 52.0 --- 0.3%
Bayerische Landesbank --- 51.0 --- ---BBVA
385 51.0 --- 0.2%
BMO Capital Markets 390 52.0 --- 0.3%
BNP Paribas 390 52.3 --- 0.7%
BofA Merrill Lynch 390 50.5 --- 0.2%
Briefing.com 395 50.5 --- 0.2%
Capital Economics --- 52.0 --- 0.5%
CIBC World Markets --- 52.0 --- ---Citi
390 51.5 --- 0.5%
ClearView Economics --- 51.0 45.0 0.4%
Commerzbank AG 390 51.0 --- ---
Credit Agricole CIB --- 52.0 --- ---
Credit Suisse 405 52.5 --- ---
Daiwa Securities America --- 52.0 --- 0.0%
DekaBank --- 52.0 --- 0.4%
Desjardins Group 390 51.0 --- 0.0%
Deutsche Bank Securities 390 53.0 --- 0.1%
Deutsche Postbank AG --- 53.0 --- ---DZ
Bank --- 51.0 --- ---Exane
--- 51.2 --- ---Fact & Opinion Economics 385
52.0 --- 0.2%
First Trust Advisors 391 51.4 --- -0.1%
Goldman, Sachs & Co. --- 51.0 --- 0.0%
Helaba 390 51.0 --- ---High
Frequency Economics 390 52.0 --- 0.5%
HSBC Markets 390 52.0 --- ---Hugh
Johnson Advisors --- 52.0 --- ---
IDEAglobal 380 52.0 44.0 0.4%
IHS Global Insight --- 52.0 --- -0.2%
Informa Global Markets 395 52.5 52.0 -0.4%
ING Financial Markets --- 52.1 43.0 0.3%
Insight Economics 395 51.5 --- 0.5%
Intesa-SanPaulo --- 51.5 --- 0.2%
J.P. Morgan Chase 390 52.0 --- 0.0%
Janney Montgomery Scott --- 50.9 --- 0.3%
Jefferies & Co. --- 52.0 --- 0.2%
Landesbank Berlin 400 51.2 --- 1.0%
Landesbank BW --- 52.5 --- 0.3%
Maria Fiorini Ramirez 390 52.0 --- ---
Market Securities --- 52.1 --- ---MET
Capital Advisors --- 50.9 --- ---Moody’s
Analytics --- 52.3 --- 0.3%
Morgan Keegan & Co. --- --- --- 0.2%
Morgan Stanley & Co. 385 51.0 --- 0.2%
National Bank Financial --- 51.0 --- ---
Natixis --- 51.0 --- ---
Nomura Securities --- 51.2 43.6 ---
Nord/LB 390 50.5 47.0 ---OSK
Group/DMG --- 51.3 --- ---
Parthenon Group 394 50.2 44.6 -0.7%
Pierpont Securities 395 52.2 --- ---
PineBridge Investments 399 52.0 --- 0.5%
PNC Bank --- 52.0 --- 0.3%
Prestige Economics --- 50.5 --- ---
Raiffeisenbank International --- 51.0 45.0 ---
Raymond James --- 51.8 --- 0.8%
RBC Capital Markets --- 52.0 --- ---
Schneider Foreign Exchange 390 51.5 45.0 0.4%
Scotia Capital 390 52.0 --- ---SMBC
Nikko Securities --- 52.0 --- 0.5%
Societe Generale 415 53.0 47.5 1.0%
Standard Chartered 390 51.8 --- ---
State Street Global Markets 387 52.3 50.4 0.2%
Stone & McCarthy Research 393 52.1 --- 0.3%
TD Securities 390 52.5 --- 0.5%
UBS 395 51.5 50.0 0.2%
UniCredit Research --- 51.0 --- ---
Union Investment --- 50.4 --- ---
University of Maryland 395 51.5 45.0 0.5%
Wells Fargo & Co. --- 51.3 --- 0.5%
WestLB AG --- 51.5 --- 0.4%
Westpac Banking Co. 385 50.5 --- 0.5%
Wrightson ICAP 395 51.5 --- -0.4%
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