The Institute for Supply Management, Chicago, said on Thursday that its business barometer rose to 61.1 after slowing abruptly to 56.6 in May. The gain defied economists’ expectations for a decline to 54.
The sturdy factory activity in the automotive-heavy region ended a string of weak regional manufacturing surveys and raised optimism that the economy might start to emerge from the soft patch of the first half of the year.
“This may be an indication that we are at least at the bottom of this slowdown, not only in manufacturing but also economic,” said Millan Mulraine, senior macro strategist at TD Securities in New York. “In the months ahead we are likely to see a resurgence in growth.”
But optimism was tempered somewhat by a separate report from the Labor Department showing that initial claims for state unemployment benefits slipped just 1,000 to 428,000 last week. Economists had expected claims to drop to 420,000.
It was the 12th straight week that claims have been above 400,000, a sign the labor market has stagnated. Employment stumbled badly in May, with employers adding just 54,000 jobs — the fewest in eight months.
The brightening manufacturing picture was enhanced by a survey from the Federal Reserve Bank of Kansas City that showed factory production in its region rebounded strongly this month after slumping in May.
The bullish reports prompted some institutions, including Deutsche Bank and JPMorgan, to raise their forecasts for Friday’s Institute for Supply Management index of national factory activity. They now expect the index to show underlying strength in a sector that has led the economic recovery.
Details of the Chicago Purchasing Managers Index survey were generally upbeat, with new orders and production rising. The employment index was lower but still indicated expansion.
“The recovery in the Chicago P.M.I. strongly suggests that manufacturing activity got a noticeable boost from improving auto sector conditions in the back half of the month,” said Joseph A. LaVorgna, chief United States economist for Deutsche Bank.
Recent surveys from the New York and Philadelphia regional Fed banks have shown steep declines in factory activity in those two areas, but Mr. LaVorgna said the Chicago PMI had a bigger weighting in the ISM index than the other two combined.
A report on Wednesday showed Japanese factory output rose by the most in almost 60 years in May, pointing to a speedy restoration to earthquake-damaged supply chains.
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