Manufacturing expanded in March at the fastest pace since July 2004, indicating factories will be a source of strength for the US recovery in coming months.
The Institute for Supply Management’s factory index rose to 59.6, exceeding the most optimistic forecast in a Bloomberg News survey of 77 economists, from 56.5 in February. Readings above 50 signal expansion. The Tempe, Arizona-based group’s gauge of exports rose to the highest level since 1989, while orders and production increased at faster rates last month.
Rising demand in the US and Asia, combined with the need to restock inventories, is giving a boost to companies from Honeywell International Inc to Boeing Co.
A factory rebound may also help propel employment gains throughout the economy, one reason analysts anticipate a government report tomorrow will show payrolls rose this month by the most in three years.
“Manufacturing is on a tear,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, whose forecast of 59 was the highest in the Bloomberg survey. “Manufacturing-driven growth and export-driven growth are getting us out of the recession and turning this recovery into a more sustainable one. As production increases, it means job gains are going to spread.”
Stocks extended gains and Treasury securities declined after the report. The Standard & Poor’s 500 Index rose 0.8 per cent to 1,179.22 at 10:36 a.m. in New York. The 10-year Treasury note fell, pushing up the yield to 3.87 per cent from 3.83 per cent late yesterday.
Economists projected the factory index to rise to 57, based on the median forecast in the Bloomberg survey. Estimates ranged from 54 to 59.
American factories are sharing in a manufacturing revival that extends from Asia to Europe as the global economy rebounds. In China, manufacturing expanded for a 13th month, while European factories grew at the fastest pace since November 2006, figures released today showed.
China’s Purchasing Managers’ Index increased to 55.1 in March from 52 the previous month, Hong Kong-based Li & Fung Group said. A factory index based on a survey of euro-area purchasing managers rose to 56.6 last month from 54.2, according to London-based Markit Economics. A gauge of UK manufacturing reached a 15-year high. Readings above 50 indicate expansion.
Fewer Americans filed claims for jobless benefits last week, according to the Labor Department in Washington. Initial jobless applications dropped by 6,000 to 439,000 in the week ended March 27. The average number of claims during the last four weeks fell to the lowest level since September 2008.
The US ISM’s gauge of export orders jumped to 61.5 in March, the highest since September 1989, from 56.5. The production index rose to 61.1 from 58.4 the prior month, and new orders index increased to 61.5 from 59.5.
The supplier delivery gauge, a measure of the time it takes to receive goods, rose to 64.9 from 61.1 the prior month. The measure of orders waiting to be filled fell to 58 from 61. The index of prices paid rose to 75 from 67.
The inventory index increased to 55.3, expanding for the first time since April 2006, from 47.3. A figure below 50 means manufacturers are reducing stockpiles. The employment index decreased to 55.1 from 56.1.
Caterpillar Inc., the world’s largest maker of construction equipment, in March said it plans to hire 500 workers this year to expand a generator plant in Newberry, South Carolina.
A report tomorrow from the Labor Department is forecast to show manufacturing jobs increased 14,000 in March, the third straight gain, according to the median estimate in a Bloomberg survey.
All employers may have added about 180,000 workers to their payrolls during the month, an increase that reflects better weather than in February and temporary hiring by the federal government to conduct the 2010 census, the survey showed.
Makers of business equipment are enjoying a pickup in investment, which advanced at a 19 per cent annual rate in the final three months of 2009. It was the biggest gain since 1998, according to the Commerce Department.
Honeywell, the Morris Township, New Jersey-based maker of controls for planes and buildings, this week raised its first- quarter profit forecast on stronger orders and cost controls.
“We continue to see signs of recovery throughout our portfolio and are encouraged by improving customer order trends,” Chief Executive Officer David Cote said in a March 30 statement.
Chicago-based Boeing, the world’s second-biggest commercial-plane maker, said it’ll boost production of its largest jets in coming years to meet stronger demand as airlines rebound from the recession-induced travel slump.
Efforts to stabilize inventories provided the biggest boost to growth in the final three months of 2009, when the economy expanded at a 5.6 percent annual rate, the fastest in six years.
Job gains are still needed to spur consumer spending, which accounts for about 70 percent of the economy. The Labor Department figures tomorrow may also show the jobless rate held at 9.7 percent.
