U.S. manufacturing improves in April
Manufacturing in the U.S. probably contracted in April at the slowest pace in six months after a collapse in inventories caused orders to steady, economists said before a report today.
The Institute for Supply Management’s factory index rose to 38.4 last month from 36.3 in March, according to the median forecast of 66 economists surveyed by Bloomberg News. Fifty is the dividing line between expansion and contraction.
Companies cut stockpiles last quarter at the fastest pace on record, bringing forward the day when production and employment stabilize and help right the world’s largest economy. Still, the worst recession in at least a half century is likely to persist a bit longer as companies from Caterpillar Inc. to Chrysler LLC and General Motors Corp. continue to cut back.
“Companies might be seeing stronger order flows than they saw earlier in the year,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “It’s still pointing to contraction, but we’re seeing some moderation.”
The Tempe, Arizona-based group’s report is due at 10 a.m. New York time. Estimates ranged from 35 to 42.2.
Other reports may show consumer sentiment rose last month and factory orders declined in March. The Reuters/University of Michigan confidence numbers and the Commerce Department’s figures on factory orders are also scheduled to be released at 10 a.m.
Economy Shrinks
The U.S. economy contracted at a 6.1 percent annual rate in the first quarter, worse than economists forecast, marking the weakest performance since 1957-1958. Inventories dropped at a record $103.7 billion rate in the first three months of the year, which some economists said may set the stage for better results this quarter.
Federal Reserve officials this week voted to keep the benchmark overnight lending rate between banks in a range of zero to 0.25 percent and said the pace of economic contraction “appears to be somewhat slower.”
Regional surveys have indicated manufacturing is on the mend. The Institute for Supply Management-Chicago’s business barometer and the New York Fed’s Empire State index climbed to the highest levels since September, and the Philadelphia Fed’s gauge also improved.
Automakers have been the worst hit among manufacturers. Chrysler yesterday proceeded with a Chapter 11 bankruptcy filing to reorganize into a more viable carmaker in a partnership with Italy’s Fiat SpA. Chrysler will idle its factories on May 4, and normal production will not resume until the bankruptcy is complete.
Housing Slump
The global recession and the U.S. housing downturn have cut into sales and production.
Caterpillar, the world’s largest maker of bulldozers and excavators, last month posted its first quarterly net loss in 16 years and said full-year profit and sales will trail its previous forecast. The company, based in Peoria, has cut more than 24,000 jobs since December and forecast the global economy will decline about 1.3 percent this year.
“A great deal of uncertainty exists in the global economy, making it extremely difficult to know how our customers will respond during the remainder of 2009,” Chief Executive Officer Jim Owens said in a statement.
Still, cutbacks in inventories are helping others. Dow Chemical Co., the largest U.S. chemical maker, said yesterday global demand has improved each month since December and customers have now used up their stockpiles. Its shares rose the most in at least 28 years in New York trading.
“There are some signs that the pace of global economic decline is moderating,” Dow’s Chief Executive Officer Andrew Liveris said in a statement. “It’s prudent to expect that 2009 will still be a recessionary year globally, and we are not counting on material improvements in economic conditions in the near term.”