Chicago Purchasers’ Index Declined to 58.8 in March (Update2)
By Courtney Schlisserman
March 31 (Bloomberg) -- Business activity in the U.S. expanded in March for a sixth straight month, a private report showed.
The Institute for Supply Management-Chicago Inc. said today that its business barometer fell to 58.8, lower than anticipated, from a February reading of 62.6 that was the highest since April 2005. Figures greater than 50 signal expansion. Orders placed with U.S. factories rose in February, while inventories and backlogs climbed by the most in more than a year, a Commerce Department report showed today.
Companies such as Applied Materials Inc. are benefitting from the global economic expansion and increased equipment purchases, indicating manufacturing will keep leading the recovery. Production gains that have encouraged factories to add workers may help lift the broader economy.
“Manufacturing is clearly a bright spot for the U.S. economy,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. Today’s Chicago index is “still supportive of ongoing expansion and momentum in the manufacturing sector.”
Economists forecast the index would fall to 61, according to the median of 54 projections in a Bloomberg News survey. Estimates ranged from 58 to 64.4. In the last six months of 2009, the Chicago index averaged 50.5.
ADP Payrolls
Companies in the U.S. unexpectedly cut payrolls in March, a report from ADP Employer Services showed today. The 23,000 decrease compared with the median estimate for a 40,000 rise and showed employers are still hesitant to add workers until they see sustained gains in sales.
Stocks held earlier losses and Treasury securities rose after the report. The Standard & Poor’s 500 Index declined 0.1 percent to 1,171.74 at 10:25 a.m. in New York. The 10-year Treasury note increased, pushing down the yield to 3.82 percent from 3.86 percent late yesterday.
Factory orders increased 0.6 percent in February after a revised 2.5 percent surge in January that was larger than previously estimated, the Commerce Department said. Inventories rose 0.5 percent, the most since August 2008, while unfilled orders also increased 0.5 percent, the biggest gain since July 2008.
The supply managers’ group’s gauge of new orders dropped to 61.8 from 62.2 the prior month. The index of order backlogs decreased to 54.3 from 58.5.
The employment measure rose to 53.1 from 53.
Jobs Forecast
The Labor Department is scheduled to release its monthly employment report on April 2. Economists surveyed by Bloomberg News project payrolls rose 180,000 in March, the most since 2007. Manufacturers added workers in January and February, the first back-to-back gains since 2006.
The Chicago Purchasers index of production decreased to 60.5 from 65.2 in February. The gauge of inventories jumped to 52.4 from 42.4.
A measure of prices paid for raw materials fell to 66.6 from 67.7, which was the highest level since September 2008.
Economists watch the Chicago index for an early reading on the outlook for manufacturing. The group says its membership includes both manufacturers and service providers, making the gauge a measure of overall growth. Its members have operations across the country as well as abroad.
A separate gauge of national manufacturing, the Tempe, Arizona-based Institute for Supply Management’s factory index, probably rose to 57 from 56.5 in February, according to a survey median. That report is due tomorrow.
A Leader
Manufacturing has been a leader in bringing the U.S. out of the worst recession since the 1930s. The economy expanded at a 5.6 percent annual rate in the fourth quarter, with efforts to stabilize inventories providing the biggest boost to growth.
While inventory restocking may also contribute to first- quarter growth, its effects on the economy most likely will fade through the rest of the year, said Zach Pandl, an economist at Nomura Securities International Inc. in New York.
Some companies say the strength in the economy extends beyond inventory replenishment.
“We’re seeing some real positive growth, not just inventory correction,” Daryl Dulaney, Siemens AG’s industry division’s U.S. operations chief, said in an interview on March 24. “There are sparks of life there that I think are sustaining. It’s not just a blip on the screen.”
Siemens Hiring
Siemens Industry Inc., the U.S. segment, is hiring, Dulaney said, citing plant operations or expansions for the wind-turbine drive business in Elgin, Illinois, and Hutchinson, Kansas. The U.S. industry unit announced 600 production and 50 white-collar jobs last year.
Exports are also helping support manufacturing. Demand from overseas increased for eight straight months before falling in February, Commerce Department data showed earlier this month.
Applied Materials, the world’s largest producer of chipmaking equipment, yesterday raised its annual sales forecast. Sales will grow more than 60 percent this year, compared with an earlier forecast of 50 percent, the company said at its analyst day meeting in New York.
“Business in each of our segments is improving,” George Davis, chief financial officer at Applied Materials, said in a statement.
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