Industrial production in the US probably accelerated in March as manufacturers stayed at the forefront of the recovery from the worst recession since the 1930s, economists said before reports today.
Output at factories, mines and utilities climbed 0.7 per cent after a 0.1 per cent increase in February that may have reflected shutdowns due to the blizzards, according to the median forecast of 78 economists surveyed by Bloomberg News. Other reports may show manufacturing gains extended into this month and homebuilders were less pessimistic.
Encouraged by rising sales in the US and abroad, companies may keep rebuilding depleted inventories and investing in equipment, one reason why producers like Intel Corp see better times ahead. Payrolls will probably climb further as factories ramp up, helping drive consumer spending.
“The economy is gaining traction, and manufacturing is leading the way,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “We have a positive feedback between a manufacturing recovery, employment and presumably then consumer spending.”
The Federal Reserve’s industrial production figures are due at 9:15 am in Washington. Economists’ estimates ranged from gains of 0.3 per cent to 1.2 per cent. Manufacturing accounts for about 12 per cent of the economy.
At 8:30 am, the Fed Bank of New York may report its Empire State Index rose to 24 in April, according to the Bloomberg survey median. The Philadelphia Fed’s general economic gauge, due at 10 am, may have climbed to 20 this month, the highest level so far this year, the survey showed. Readings greater than zero signal growth.
Also at 8:30 am, figures from the Labor Department may show the number of Americans filing claims for jobless benefits fell by 20,000 last week to 4,40,000, the survey median shows.
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Mounting evidence that the economic expansion is broadening has pushed the Standard & Poor’s 500 Index up 8.6 per cent this year. The measure closed yesterday at the highest level since September 2008.
A report at 1 pm may show the National Association of Home Builders/Wells Fargo index of builder confidence rose to 16 this month from 15 in March, according to the Bloomberg survey. Readings below 50 mean most respondents view conditions as poor.
The production report may also show capacity utilization, or the proportion of plants in use, climbed to 73.3 per cent, the highest level since November 2008, according to the survey. The rate averaged 81 over the past four decades.
Economists track plant operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher.
Excess capacity is one reason Fed policy makers see little risk of inflation. Fed Chairman Ben S Bernanke yesterday said the rate of increase in consumer prices was “subdued,” and “moderation in inflation has been broadly based.” He also said economic growth will remain “moderate” as the economy contends with weak construction spending and high unemployment.
Intel, the world’s biggest chipmaker, is among companies benefiting from rising demand. The Santa Clara, California-based producer this week forecast record profit margins for the year and said sales will rise this quarter after a 44 per cent gain in the first three months of the year.
Consumers served as a “big driver” of computer demand and corporate executives, more confident about their outlook, are replacing aging machinery, Chief Executive Officer Paul Otellini told analysts on an April 13 conference call. “We are optimistic about the prospects of our business for 2010 and beyond.”