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Business Title: Manufacturing in U.S. Expands at Fastest Pace Since 2004 on Global Demand May 3 (Bloomberg) -- Manufacturing expanded in April at the fastest pace since 2004, propelling a U.S. recovery that’s getting a bigger lift from consumer spending. The Institute for Supply Management’s factory index rose to 60.4, the highest level since June 2004 and exceeding the median forecast in a Bloomberg News survey of 76 economists. Readings greater than 50 signal expansion and today’s report marks a ninth consecutive month of growth. Parker Hannifin Corp. is among manufacturers receiving more orders as U.S. and overseas customers invest in new equipment and replenish inventories. The factory resurgence may soon translate into faster growth at service industries, fueling job gains and solidifying the expansion. “The manufacturing sector is looking quite strong right now,” Norbert Ore, chairman of the ISM survey, said in a conference call from Atlanta. “We really don’t have any reason to believe this won’t continue. The second quarter will continue to be strong.” Economists projected the U.S. factory index to rise to 60, based on the median forecast in a Bloomberg survey. Estimates ranged from 57 to 65. Stocks maintained gains and Treasury securities fell after the report. The Standard & Poor’s 500 Index rising 0.5 percent to 1,192.19 at 11:02 a.m. in New York. The 10-year Treasury note declined, pushing up the yield 3 basis points to 3.69 percent. A basis point is 0.01 percentage point. Global Expansion The U.S. is sharing in a global manufacturing expansion that’s gaining strength. Europe’s factories grew last month at the fastest pace since June 2006, while Australian manufacturing growth jumped to the highest level since May 2002, other reports showed today. A manufacturing index based on a survey of euro-area purchasing managers increased to 57.6 from a March reading of 56.6, London-based Markit Economics said. A gauge of factory performance in Australia surged 9.3 points to 59.8 in April, the Australian Industry Group and PricewaterhouseCoopers said. Also today, the Commerce Department reported that personal spending rose 0.6 percent in March, the most in five months, after a 0.5 percent gain. Incomes increased 0.3 percent, the first gain this year. Gaining Confidence The figures show American consumers, whose spending accounts for 70 percent of the economy, are gaining confidence in the recovery. Their purchases in the first quarter rose at a 3.6 percent annual rate, the fastest in three years, the Commerce Department reported last week. Spending added 2.55 percentage points, the most since the fourth quarter of 2006, to economic growth of 3.2 percent from January through March. Construction spending unexpectedly increased in March, propelled by gains in state and local government projects, a Commerce Department report showed. The 0.2 percent rise followed a 2.1 percent drop in February. Factories in the U.S. have also benefited from stronger global economies and domestic demand. The ISM’s production index jumped to 66.9, the highest since January 2004, from 61.1 the prior month, and the new orders index increased to 65.7 from 61.5. The employment index increased to 58.5, the highest since January 2005, from 55.1. Export Orders The gauge of export orders fell to 61 from 61.5 in March, which was the highest since September 1989. The supplier delivery gauge, a measure of the time it takes to receive goods, fell to 61.3 from 64.9 the prior month. The measure of orders waiting to be filled fell to 57.5 from 58. The index of prices paid rose to 78 from 75. The inventory index decreased to 49.4 from 55.3. A figure less than 50 means manufacturers are paring stockpiles. Flush with profits, businesses are spending more on equipment. Business investment rose at a 13.4 percent annual rate in the first quarter after a 19 percent surge at the end of 2009. Cleveland, Ohio-based Parker Hannifin Corp’s total orders were up 23 percent in the first quarter and its international industrial orders surged 42 percent from a year earlier, the maker of hydraulic equipment reported last week. “In most of our markets, we continue to see a more consistent picture of improving year-over-year trends,” Don Washkewicz, the Cleveland-based company’s chief executive officer, said in an April 20 conference call. “North America continues to show signs of recovery.” Efforts to stabilize inventories contributed 1.6 percentage points to growth in the first quarter after a 3.8 point boost in the prior there months, the Commerce Department’s report on gross domestic product showed last week. Job gains are still needed to sustain the recovery. Employers increased payrolls by 200,000 workers in April, economists surveyed by Bloomberg forecast before the May 7 report. The Labor Department’s figures may also show the jobless rate held at 9.7 percent, while manufacturing employment probably increased for a fourth straight month.
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