A gauge of U.S. manufacturing may have held close to a two-decade high in February led by rising orders and production, according to a survey of economists in advance of today's industry report. A reading of 62 is expected for the Institute for Supply Management's February factory index compared with 63.6 the previous month, according to the median of 52 forecasts in a Bloomberg News survey of economists. A separate Commerce Department may show January personal income registered the largest increase in eight months, exceeding a rise in spending.
Factories are churning out more computers, chips and other goods to meet consumer and business demand and rebuild inventories. A boost in business investment will probably keep assembly lines running and fuel the economy this year. Business spending ``is off to a solid start in the first quarter,'' said Joshua Shapiro, chief U.S. economist at MFR Inc., a New York-based forecasting firm. ``Firm final demand combined with lean inventories bodes well for orders and output.'' The manufacturing report is set for 10 a.m. Washington time. Americans' incomes probably rose 0.5 percent in January, the biggest increase since May, after rising 0.2 percent in December, based on the median projection of economists. The gain would outpace a projected 0.3 percent increase in consumer spending. The Commerce Department issues the income and spending report at 8:30 a.m. in Washington. Construction spending may have increased for an eighth consecutive month in January, another Commerce Department report may show at 10 a.m. Washington time. A 0.3 percent increase is forecast after a 0.4 percent rise, according to the median of economists' forecasts.
Manufacturing
The March manufacturing index would be the fourth consecutive reading greater than 60, the longest such stretch since an eight-month string concluded in February 1984. Readings above 50 in the index suggest manufacturing is expanding. The January reading was the highest since December 1983. The institute surveys more than 400 companies in 20 industries, including clothing, printing, transportation, furniture and plastics. Manufacturing accounts for about one- seventh of the economy. ``We're seeing that the industry demand is stronger than we had in our first-quarter forecast and stronger going forward for the year,'' said Robert Lannert, chief financial officer at Navistar International Corp., the world's fourth-largest truckmaker, on a conference call with analysts last week.
Factory Production
The Warrenville, Illinois-based manufacturer last week raised its profit forecast for the year and boosted its estimates for industry sales in the U.S. and Canada 8.9 percent for heavy trucks and 8.1 percent for medium-duty models. Factory production rose in each of the last five months of 2003, pushing the amount of capacity in use to 74.6 percent, 2 percentage points more than the 20-year low reached in May. The rate is still below the 81.1 percent average during the 1991 to 2001 expansion.
Factory production this year will jump 5 percent following the 0.3 percent increase in 2003, according to the consensus forecast of economists polled last month by Blue Chip Economic Indicators. The economy will probably expand 4.6 percent this year, the best performance since 1984, according to the Blue Chip survey. In addition to faster production, the improvement this year is due to a 9.8 percent increase in business investment, more than three times stronger than the 2.8 percent gain last year, the survey showed. The world's largest economy grew 3.1 percent in 2003. //www.bloomberg.com