US Data Preview: Mfging On The Brink, Clinging To Growth

Author: Market News International | Category: News

By Chris Cermak

WASHINGTON (MNI) – Surveys of purchasing managers from around the
United States should indicate that national manufacturing was just
barely growing in September, despite weakness in a number of regions of
the country.

Economists have been bracing for a possible contraction in
manufacturing ever since regional indicators from the Federal Reserve
banks of New York and Philadelphia turned negative in June. The Richmond
Fed’s manufacturing report has signaled a contraction in its region
since July.

Yet the national Institute of Supply Management’s manufacturing
report has remained barely positive, helped by growth in Chicago, one of
the nation’s key manufacturing regions, and in Dallas.

That trend likely played out again in the month of September. The
Philly Fed’s manufacturing came in at -17.5, the third negative reading
in four months, while the Empire Fed’s index fell for the fourth
straight month to -8.8. By contrast, the Dallas Fed’s index climbed to
5.9, up from 1.1 in August.

The Chicago Purchasing Managers’ Index, due out Friday, is expected
to come in at 55.5 for September, according to a survey of economists by
Market News International. That would be down from 56.5 in August and
mark the lowest level since November 2009, yet it would still be
stronger than most other parts of the country.

Chicago-area executives speaking to MNI’s Reality Check this week
suggested that uncertainty over the euro-area debt crisis and U.S.
fiscal disputes weighed on business sentiment this month, yet aerospace
and automotive-related manufacturers in particular still reported
positive growth.

But the Chicago region could see a stronger decline than expected
as the automotive sector begins to fall in line with broader weakness in
the U.S. economy, according to Peter D’Antonio, an economist with
Citigroup. Durable goods figures out Wednesday indicated new orders in
the auto sector fell 8.5% in August.

“More than likely, what we’re going to see is the Chicago number
move towards the national average,” D’Antonio told MNI.

With the regional indicators mixed again for this month, the
national ISM manufacturing index is forecast to hold just barely in
positive territory at 50.5 when it is released Monday, according to
MNI’s survey of economists. That would be down ever so slightly from a
reading of 50.6 the previous month.

While all regions have been trending down in recent months, Chad
Moutray, chief economist with the National Association of Manufacturers,
acknowledged there was “a little bit more of a pessimistic attitude”
among manufacturers in the east and north-east of the country than in
the Midwest.

Both the U.S. and European political problems were dampening the
outlook for manufacturers, Moutray said. But many manufacturers “are
looking beyond those hurdles” and the sector was unlikely to slip into
recession nationally.

“The overall picture for manufacturing is good going forward,” he
said.

The national Purchasing Manager’s Index has held above 50 despite
negative readings in the last month for its new orders, order backlogs
and production components. Supplier deliveries held positive at 50.6.

Moutray said he expects new orders to remain negative for another
month or two, but “as we get closer to the end of the year you’ll see
new orders pick up.”

Other manufacturing indicators have been relatively stagnant,
mirroring the sluggish growth and weak employment in the wider U.S.
economy.

Durable goods have been trading losses and gains for months. New
orders slid 0.1% in August, with durables ex-transport also down 0.1%,
the first monthly drop since April. Yet core capital goods orders
(ex-defense and ex-aircraft) rose 1.1%, the most in three months, and
core shipments rose 2.8%, prompting some economists to revise their
expectations slightly upward for third quarter GDP growth.

Industrial production for August edged up 0.2%, according to the
Federal Reserve, down from a 0.9% gain in July.

— Chris Cermak is a Washington reporter for Need to Know News.

** Market News International Washington Bureau: 202-371-2121 **

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