May 1, 2004
Midwest Industry Index Is Far Above Forecasts
By BLOOMBERG NEWS
n index of manufacturing in the Midwest rose much higher than expected in April, a report showed yesterday, pointing to improvement in industry ahead of a national report on Monday.
A separate report showed that a measure of consumer confidence edged lower, and the government reported that consumer spending rose 0.4 percent in April, somewhat less than forecast, while personal income grew 0.4 percent.
The National Association of Purchasing Management-Chicago said its gauge of regional business, watched by economists for clues about manufacturing, rose to 63.9 in April from 57.6 in March. Readings above 50 signal expansion. Economists had expected the Chicago index to rise to 61.
"There are bigger gains ahead as payrolls pick up speed and hourly earnings begin to recover," said Ian Shepherdson, chief United States economist at High Frequency Economics in Valhalla, N.Y.
The Chicago index is close to the decade high of 65.9 reached in January. Indexes measuring production, new orders, backlogs, employment and supplier deliveries accelerated during the month. A gauge of inventories rose to the highest point in almost 10 years.
Slow job creation and rising gasoline prices have restrained optimism, a survey from the University of Michigan indicated. The university's final index of consumer sentiment for the month fell to 94.2 from 95.8 in March. The preliminary reading two weeks ago had been 93.2.
A 23 percent increase in the average cost of a gallon of gas so far this year has negated some benefits from increased tax refunds and increased consumer perception that some prices are rising amid low overall inflation, economists said.
Nevertheless, consumers increased spending in March for a sixth consecutive month as their incomes rose, encouraging manufacturers to increase production and inventories.
The 0.4 percent rise in personal spending in March matched February's gain, the Commerce Department said in a report. Incomes also rose 0.4 percent.
Incomes in the first quarter grew at a 5.6 percent annual rate, the fastest since the third quarter of 2000, the report indicated. With the contributions from tax refunds and refinancing likely to diminish in coming months, job creation will help add to income growth and bolster consumer spending, economists said.
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