"U.S. Economy: Chicago Factory Index at 19-Year Low"
Where DO I find this stuff?!? Oh, that's right... Doomberg. <gg>
Razor
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03/30 16:41
By Andrew Ward and Carlos Torres
Chicago, March 30 (Bloomberg) -- Manufacturing in the Chicago area this month fell to its lowest level in almost two decades as new orders and production decreased, according to a private industry survey.
The National Association of Purchasing Management-Chicago said its monthly index of regional manufacturing fell to 35 -- the lowest since April 1982 -- from 43.2 in February. Analysts expected a reading of 43.5.
"The retrenchment in manufacturing is persisting," said William Sullivan, senior economist at Morgan Stanley Dean Witter in New York. "It's deeper and more widespread than we saw a month ago." In February, the association's national index rose for the first time in a year.
The Chicago index, which includes makers of autos and their parts, has shown declining factory business since October. Delphi Automotive Systems Corp., the biggest parts manufacturer, yesterday said it will lose $50 million and cut 11,500 jobs, or 5.4 percent of its workforce, because of slower car production.
U.S. Treasury securities rose after the report as investors bet the economy's slowing enough to prompt an interest-rate cut by the Federal Reserve before it meets in May. The 10-year note rose 5/8 point, pushing down its yield 9 basis points to 4.91 percent.
National Report
While the Chicago purchasing managers' report mostly measures manufacturing in the Chicago area, investors watch it for clues about the direction of the group's national manufacturing index, which will be released Monday at 10 a.m. Washington time. The national report is separate from the Chicago survey and doesn't necessarily move in tandem with it.
Two other reports today suggest consumers may help keep the economy out of recession. Spending rose 0.3 percent last month after a 1 percent rise in January, which was the largest increase in almost a year, the Commerce Department said. Incomes rose 0.4 percent after rising 0.5 percent the month before.
The University of Michigan's index of consumer sentiment rose more than expected to 91.5 in March from February's 90.6. That follows a report earlier this week showing the Conference Board's consumer confidence index unexpectedly rose for the first time since November.
"Households are keeping this economy going," said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. "With job growth still solid and wages rising, there was really no reason for people to stop visiting their favorite travel destination -- the mall."
First Quarter
The Commerce Department report suggests personal spending may have increased at a 3 percent to 3.5 percent annual rate in the first three months of the year, according to statistics compiled by Bloomberg News. That would be up from the fourth-quarter's 2.8 percent pace, which was the slowest in 3 1/2 years.
The economy slowed to a 1 percent annual growth rate during the last three months of 2000, the weakest performance in 5 1/2 years, after expanding 6.1 percent in the 12 months from July 1999 to June 2000. Fed policy makers reduced their benchmark overnight bank lending rate three times by 1.5 percentage points so far this year to keep the economy from weakening further.
First-quarter growth probably slowed to a 0.7 percent rate, reflecting slower growth in business investment and inventory reduction, according to a preliminary survey of economists by Bloomberg News. That would leave growth over the last two quarters at the weakest pace since the economy expanded at a 0.1 percent pace in the first half of 1991 -- at the end of the last recession and the beginning of the current expansion.
The Midwest's sixth-month slump is the longest since the recession of 1991, when factories slowed for 12 consecutive months between August 1990 and July 1991.
Orders, Production
The purchasers' index of new orders fell to 35.1 this month from 43 in February and the production index fell to 34.8 from 43.1. The index measuring inventory levels fell to 41.5 in March from 45 in February.
The Chicago purchasers' employment index, a measure of hiring plans and labor market conditions, fell to 32.3 in March from 42.2 in February. The Illinois unemployment rate last month rose to a four-year high of 4.9 percent.
General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler unit -- the three biggest U.S. automakers -- cut production by 21 percent in the first three months of the year to reduce inventories.
U.S. auto sales fell less than expected in February. And based on the first two months of the year, sales may match last year's record 17.4 million vehicles, defying analysts' predictions that consumers would buy fewer cars as the economy slows.
Companies that make parts for cars still are feeling the effects of the assembly-line shutdowns. Glenview, Illinois-based Illinois Tool Works Inc., whose products include car-door handles, also said this month first-quarter and 2001 profit will be less than forecast.
"It might be that the gloom is now concentrated in auto- dependent sectors, rather than the car companies themselves," said Ian Shepherdson, chief U.S. economists at High Frequency Economics Ltd. in New York.
Mixed Clues
Recent reports give mixed clues about the direction of the manufacturing sector. The Philadelphia Federal Reserve Bank factory index improved this month, showing that the decline in factory activity there slowed for a second month in a row.
The Fed reported March 16 that U.S. industrial production fell in February for a fifth consecutive month amid declines in manufacturing, mining and utilities. The last time industrial production rose was in September.
Some economists and manufacturers say manufacturing's fortunes may improve in the second half of the year.
Factories "appear to be well along in their inventory adjustment process and, if that's the case, it should augur well for the economy going forward," said Gary Stern, president of the Federal Reserve Bank of Minneapolis, in an interview on Bloomberg Television earlier this week.
For example, Dana Corp., the largest maker of light-truck axles, said it will build a factory in Longview, Texas, to make frames and other structural parts for an undisclosed General Motors Corp. vehicle.
quote.bloomberg.com |
