New orders of durable goods may have risen at U.S. factories last month while a surge in the money supply and a drop in claims for unemployment insurance are bolstering expectations economic growth will accelerate, economists said in advance of reports this week. A report Friday from the Commerce Department may show that bookings for machinery, electronic goods and other products made to last three years or more increased 0.7 percent in March, according to the median forecast in a Bloomberg News survey. The report may also show that orders excluding transportation equipment gained 1.4 percent. ``The U.S. economy is up, and the manufacturing side of the economy is up,'' said Alexander Cutler, chief executive of Cleveland-based Eaton Corp., in an interview Wednesday.
Retail sales last month jumped the most in a year and regional factory surveys found increases in orders and employment in April, reports last week showed. With bookings rising and production expanding, stronger hiring may follow, helping the economy gain momentum. Federal Reserve Chairman Alan Greenspan may acknowledge the strengthening of the economy when he testifies Wednesday before Congress. ``We are entering the second stage of the recovery,'' said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis, in an interview Thursday. ``Orders are rising and, to keep up with demand, we have to increase production and employment.'' A rise in durable goods orders would be the third in the past four months. The projected gain excluding transportation equipment would be the biggest this year.
Eaton's Earnings
Eaton, the world's second-largest maker of hydraulic equipment behind Parker Hannifin Corp., said Wednesday that first- quarter earnings surged 86 percent as sales of fluid-power systems and aerospace products increased. The company also boosted its 2004 profit forecast. Purchases at retailers rose 1.8 percent in March, the biggest increase since a year earlier, the Commerce Department said last week. Regional gauges of manufacturing reported Thursday by the Federal Reserve Banks of New York and Philadelphia showed that business expanded at a faster-than- expected pace this month as companies increased hiring to keep up with orders and sales. An rise in tax refunds and a decline in jobless benefit claims may have led to a 0.3 percent jump in the Conference Board's index of leading economic indicators, to be reported tomorrow, based on the median estimate of economists surveyed. The New York-based research group's gauge of how the economy may perform over the next three to six months held steady in February after rising in each of the previous 10 months.
Tax Refunds
The nation's money supply, one of 10 components of the leading index, surged last month as some of the $142.5 billion in tax refunds sent by the end of March reached checking and money market accounts. As demand strengthens, companies are retaining workers and first-time applications for jobless benefits are slowing. In addition to the money supply and jobless claims, lengthening supplier delivery times -- which suggest factories are finding it difficult to keep up with demand -- a jump in building permits and an improvement in consumer sentiment about the future last month probably contributed to the expected increase in the leading index. The economy may expand 4.6 percent this year, the most since 1984, based on the median of 74 estimates in a separate Bloomberg News survey taken March 25 to April 5.
Jobless Claims
On Thursday, the Labor Department may report that first-time jobless claims dropped to 340,000 for the week ended yesterday from 360,000 the previous week. Such a total would bring claims back down to the March average after a 30,000 jump the week before last, which may have reflected volatility associated with the Easter holiday, the date of which changes from year to year, the Labor Department said. Fed Chairman Greenspan may acknowledge the improvement in the economy when he testifies before the Congressional Joint Economic Committee Wednesday. ``The chairman will likely note the improvement in the labor market and tentative signs of inflation pressure,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Inc. in New York, in a report to clients Friday. ``We look for a very nuanced speech that keeps open the idea of a rate hike in the second half of the year but dispels the idea of a June hike.'' Four hours after Greenspan's testimony starts, the Fed is to release its latest survey of regional economic conditions, known as the beige book for the color of its cover. Policy makers will use the collection of anecdotal information about the economy when it next meets May 4 to weigh interest-rate policy. The central bank's benchmark overnight bank lending rate target now is 1 percent, the lowest since 1958.///www.bloomberg.com