March 31 (Bloomberg) -- Exports spurred new orders and production as U.S. business activity shrank less than forecast in March, supporting the economy as consumers pare spending.
The National Association of Purchasing Management-Chicago said today its business index rose to 48.2 in March from a six- year low of 44.5 a month earlier. Figures lower than 50 signal contraction and the median forecast of economists surveyed by Bloomberg News projected a gain to 46.
The report may help ease concern that businesses investment would plummet as soaring fuel costs and slowing sales hurt profits. Orders from overseas may help American factories cope with the loss in domestic demand wrought by the nine-month credit freeze and a housing slump now in its third year.
``We are in a very sluggish economy that's barely growing at all, but it is not in a deep recession,'' said David Resler, chief economist at Nomura Securities International Inc. in New York. ``It looks nothing like a free-fall environment.''
The median projection was based on 58 forecasts in the Bloomberg survey. Estimates ranged from 39.3 to 50.
Stocks were little changed after the report, with the Dow Jones Industrial Average rising 15 points, or 0.1 percent, to 12,231 at 11:10 a.m. Treasury notes remained higher. The 10- year-bond yield retreated to 3.41 percent from 3.44 percent on March 28.
The production gauge in today's report increased to 50.4 from 46.5, the report said. The employment index rose to 44.6 from 33.5, which was the lowest since January 2002, the Chicago group said.
`Mixed Bag'
``It's a little bit of a mixed bag, but on balance, consistent with recessionary signals we've seen from other surveys,'' said Jonathan Basile, an economist at Credit Suisse Holdings in New York, who forecast the index would rise to 48.
A measure of prices paid for raw materials increased to 83.9 from 79.4 the previous month.
The Chicago report's measure of new orders improved to 53.9 from 48.8 the prior month. Order backlogs dropped to 36.8 from 38.3. The group's inventories index fell to 42 from 46 in February.
The Chicago purchasers' group surveys companies with U.S. and worldwide operations. Any group member, even those not located in the Midwest, can respond to the survey.
Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy.
ISM Tomorrow
The Institute for Supply Management is scheduled to release its national manufacturing survey tomorrow. Economists surveyed by Bloomberg News forecast that measure fell to 47.5, the lowest level in almost five years, from 48.3.
Other reports this month have shown manufacturing contracted in March. The Federal Reserve Bank of Philadelphia's general economic index registered a reading of minus 17.4 for the month, and the New York Fed's measure was minus 22.3, the lowest level since record-keeping began in 2001.
Government data also corroborates a contraction in manufacturing. Industrial production fell 0.5 percent in February, according to Fed data, and orders for durable goods unexpectedly dropped, the Commerce Department said on March 26.
Because of declines in business investment and construction, the U.S. economy will probably grow at a 0.1 percent annual pace from January through March, according to the median estimate of economists surveyed by Bloomberg earlier this month. It expanded at a 0.6 percent annual pace in the fourth quarter, matching the slowest rate of growth since 2002.
``It's clear the economy is growing little if at all,'' Fed Bank of Minneapolis President Gary Stern said after a speech at the European Economics and Financial Centre in London on March 27. ``The consensus is that it could improve in the second half. But if headwinds pick up, it could be more subdued than that.''
The Fed has cut the benchmark interest rate by 2 percentage points this year, the most aggressive easing in two decades, to try to shore up the economy and restore faith in the financial markets. On March 18, it lowered its main lending rate by three- quarters of a percentage point, to 2.25 percent.
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