September 23, 2021

Growth Slows in China’s Trust Sector

SHANGHAI — The growth of the Chinese trust sector, the largest component of the country’s so-called shadow banking system, slowed markedly in the second quarter after a government clampdown on risky lending.

China’s top leaders have signaled concern over runaway credit growth and the risk of a debt crisis as local governments and companies borrow at high interest rates from nonbank lenders, and especially from trust companies.

In June, the central bank engineered a short-term cash squeeze as a warning to banks and trust companies to scale back risky lending practices.

Data published by the China Trustee Association late Monday showed that the total assets managed by the 67 trust companies in China reached a record-high 9.45 trillion renminbi, or $1.54 trillion, at the end of June.

Although that was up 8.3 percent from the end of the first quarter, growth decelerated sharply from the 16.9 percent increase seen in the first quarter. In 2012, total managed assets grew by 55.3 percent.

Controlling shadow banking is a major element in China’s campaign to shift its economic model away from its heavy reliance on debt-fueled investment.

The China Banking Regulatory Commission and other regulators have issued a slew of new rules to curb banks’ riskier operations.

Trust companies, together with other nonbank financial institutions like brokerage firms, have become a vital source of credit, allowing banks to arrange off-balance-sheet refinancing for maturing loans that riskier borrowers, like local governments, cannot repay from their internal cash flow.

The scale of trust assets still pales in comparison with total banking sector assets of more than 100 trillion renminbi as of the end of June.

Without trust companies, the banking system’s nonperforming loans ratio might be much higher, although accurate estimates are not possible.

Trust companies sell wealth management products to raise funds so they can purchase loans that banks want off their books. Such products are then marketed through bank branches as a higher-yielding alternative to traditional bank deposits.

The Chinese banking regulator recently said that outstanding bank-issued wealth-management products totaled 9.08 trillion renminbi at the end of June.

The new data on trust company assets appear to encompass about 70 percent of that total, as bank wealth-management products usually involve cooperation with a trust company.

The association data also include funds that trust companies raise by selling the products directly to investors, without being partners with banks.

The latest figures match central bank data released last month showing that new trust lending fell sharply in June, after rapid growth in January through May.

Although wealth-management products often include only spotty disclosures about underlying assets, the trust association data offer a view of where the funds are flowing.

About 26.8 percent of outstanding wealth-management funds were invested in infrastructure at the end of June, up from 25.8 percent at the end of March. Real estate accounted for 9.1 percent, down from 9.4 percent in March.

Industrial companies made up 29.4 percent of investments, up from 27.8 percent. Investment in stocks and bonds fell to 10.5 percent from 11.1 percent.

The banking regulator said the system-wide nonperforming loans ratio was 0.96 percent at the end of the first half, up only 0.01 percentage point from the end of last year.

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Broad Audit of Chinese Government Agencies Set

HONG KONG — The National Audit Office of China said Sunday that it would conduct a broad audit of debts incurred by government agencies, in the latest sign of Beijing’s concern that heavy borrowing by local governments and their affiliates might pose a broader threat to the economy.

The audit office issued a single-sentence statement saying that it had been instructed by the State Council, or cabinet, to carry out the audit.

Western economists have estimated total local government debt in China at $2 trillion to $3 trillion and rising.

China avoided most of the effects of the recent global financial crisis through a huge program of government spending financed by debt. The stimulus program has encompassed projects ranging from a national grid of high-speed train routes to the construction of thousands of roads and bridges by municipalities, towns and villages.

In an interview last month with the Web site of People’s Daily, a deputy head of the fiscal audit section of the National Audit Office said that since last year, the outlook for the economy as a whole, and for government revenue in particular, has “not been too sunny.”

“Under these circumstances, how to avert financial risks is quite an urgent issue, said the official, Ma Xiaofang.

Those concerns have already prompted the office to audit 36 local governments this year, following a similar check in 2011, Mr. Ma said. “We must have more insight into problems, risks and hazards in local government debt management,” he said.

China has made periodic efforts over the years to assess the scope of local government debt, and Sunday’s statement by the National Audit Office was too terse to be clear about how comprehensive the latest effort would be. Bankruptcy proceedings started this month by the City of Detroit have surprised and alarmed many in China, however, prompting renewed concern about the financial health of Chinese cities and towns.

While the Chinese government has considerable unused borrowing capacity at the national level as well as $3 trillion in foreign exchange reserves, any move by the central government to bail out profligate local governments would be politically contentious within China.

Using the foreign exchange reserves to cover local government debts would also be extremely difficult for practical reasons. The central bank has financed those reserves mostly by borrowing money from Chinese commercial banks and needs to be able to repay these banks.

Beijing imposes many restrictions on the ability of local governments to borrow at all. But local governments have been widely sidestepping these restrictions by setting up special financing entities that borrow the money for them.

Many local governments also own businesses and have used their political connections to help these businesses obtain loans from state-owned banks. This has further increased possible financial liabilities for the local governments themselves.

These governments’ revenues tend to be heavily dependent on the sale to developers of long-term leases for government land, which is then used for building apartment towers, factories, shopping malls and other projects.

Developers’ interest in these leases tends to be highly cyclical, soaring when the real estate market is strong and crashing when real estate prices fall. With Beijing trying to improve the affordability of housing for the past couple years by limiting real estate speculation, developers have been more cautious about acquiring further leases.

Many local governments have also guaranteed loans to borrowers in politically favored sectors like solar panel manufacturing. That allows the borrowers to obtain loans at extremely low interest rates. But the local governments are then exposed to huge losses if the borrowers default — a constant risk given the overcapacity and declining profit margins that bedevil many Chinese industries.

“These problems must attract serious attention, and there should be effective measures taken to strengthen management of local government debt,” Mr. Ma said.

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China Introduces Local Program for Reducing Emissions

BEIJING — China unveiled its first pilot carbon emissions exchange Tuesday, though plans for a nationwide rollout and efforts to apply the program to some heavy industries could be undermined by a slowdown in the nation’s economy.

High-emission industries like aluminum and steel are likely to resist higher costs as they are already battling weak prices caused by tepid demand and too much supply.

“It is a very big concern for Beijing and for local governments — how to strike a balance between controlling emissions and maintaining economic growth, especially amid a general slowdown in the economy,” said Shawn He, a lawyer and carbon specialist at Hualian law firm in Beijing.

Although the exchange, in Shenzhen, will not immediately lead to a big cut in China’s emissions of greenhouse gases, now the world’s highest, it does still represent a statement of intent by Beijing, campaigners said.

“This is just a baby step when you look at the total quantity of emissions, but it enables China to establish institutions for carbon controls for the first time,” said Li Yan, head of the climate and energy campaign in China for the environmental group Greenpeace.

Under such a cap-and-trade program, companies must buy allowances from others if they want to exceed carbon limits.

But there is still a long way to go in China, and the design of its pilot platforms — as well as the national program that would eventually replace them — face economic and social pressures.

“Of course, decision makers have to look at the social impact; the carbon market cannot be designed in an idealistic way, and you have to make sure the design of the mechanism will address such issues as social stability,” said Wu Changhua, China director with Climate Group, a consulting firm based in London.

And the examples set by carbon markets overseas are not encouraging, with the global financial crisis saddling Europe’s emissions trading program with a crushing oversupply of carbon credits and record low prices.

The Shenzhen carbon exchange is one of seven pilot projects due to be started this year or next and will involve 635 local industrial companies accounting for more than a quarter of local gross domestic product and more than 30 million tons of carbon dioxide emissions.

But that is still a drop in the ocean compared with the country’s total emissions — about eight billion tons last year.

Other platforms due to start in 2013 include one in Shanghai, where Baoshan Iron Steel, the leading steel producer, will participate, and one in Hubei Province, home of Wuhan Iron Steel.

Although giant oil companies like Cnooc and PetroChina will take part in the Shenzhen program, few of the companies involved will be from heavy-industry sectors, and figuring out how to include them is likely to be a challenge.

Late last year, China’s industry ministry told such companies to reduce their carbon intensity rates — the volume of carbon dioxide produced per unit of output, based on the rate from 2010 — by 18 percent by 2015. That was a huge burden for a sector already bruised by rising costs and minimal returns, with the country’s economy growing at its slowest pace in 13 years in 2012 and data so far this year surprisingly negative.

But while it will add to the costs of struggling companies, it could also give Beijing another tool to bring wayward industries in line with state policies and to force polluting companies to close.

Carbon trade will give local governments an alternative source of revenue as well as an incentive to free up some of their carbon dioxide allocations by closing small steel mills.

Jiang Feitao, a researcher at the China Academy of Social Sciences who has studied the impact of environmental policy on the steel sector, said smaller companies would be hit hardest by costs.

After Shenzhen, Shanghai and Hubei Province, four more pilot exchanges are to open in Beijing, the sprawling industrial municipalities Tianjin and Chongqing, and Guangdong Province, a major manufacturing center, probably next year.

The National Development and Reform Commission said that the seven pilot projects would begin integrating in 2015 and that a nationwide platform would go into operation before 2020. But the seven regions were given considerable leeway to design their own programs and it remains unclear how they will integrate.

“My guess at this moment is that they will set up a national platform and gradually integrate the seven pilot schemes into that one, but we don’t know the architecture yet. This is very new,” said Ms. Wu of Climate Group.

Mr. He, the lawyer, said China still needed legislation to give legal recognition to the concept of carbon trading. It also needed to solve the longstanding problem of measuring emissions.

“I don’t think it is possible to get to a national market by 2015 — there are many technical issues to be addressed to integrate these islands into one continent,” Mr. He said.

China also eventually needs to set a national limit on emissions and apply it to individual industries and provinces to establish a full countrywide trading program.

“Realistically, we are looking at 2025 before we have a cap. A few years ago some were saying 2040 or 2035, so we have already made progress,” Ms. Wu said. “Growth will continue to be the No. 1 priority. Cap-and-trade will be one of the ways of trying to grow differently, but China is still a developing country and we have to grow.”

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Economix Blog: The Shrinking Government



Notions on high and low finance.

For the 31st consecutive month, the number of government jobs in February was less than it had been a year earlier. There is an employment recovery, but it is confined to the private sector.

The only comparable period in government data, which goes back to 1939, came after World War II, when the government was shrinking for a very good reason. The year-over-year string of declines ended in December 1947 at 30 months. So we have a new record here — a record being set largely because governments, particularly local ones, have been squeezed by a dearth of tax revenues. Year-over-year jobs have been down for 44 consecutive months in local governments.

For the most recent 12 months, private sector employment is up 1.9 percent. Government employment is down 0.5 percent.

As I noted last month in an Off the Charts column, men have done better in the recovery than women have done. That column was based on the government’s household survey, which asks people if they have jobs. The establishment survey, which asks employers both how many workers they have and how many of them are women, helps to explain why that is.

Women dominate in government jobs, now holding 57 percent of them, and have been losing them at a slightly more rapid pace than men have lost their government jobs. The decline in teacher employment probably explains much of that.

Another area where women dominate is in financial services. Not at the top, of course, but down in the trenches. Over all, women hold 57.8 percent of financial service jobs. But as financial service employment has recovered over the last two years, 71 percent of the added jobs have gone to men. As a result, the share of such jobs held by women is now the lowest since 1983.

The really good news in the report provides another sign of recovery in the single area — other than government — that has been holding back this economic recovery. Construction employment was up by 48,000 jobs in February. The last month construction added that many building jobs was March 2007. A month later, Countrywide Financial said its chief executive, Angelo Mozilo, had been paid $48 million in 2006, but that problems in the subprime market had reduced profits.

“Management anticipates that both subprime products and investments will return to profitability in subsequent quarters absent a material worsening of market conditions,” Countrywide said. Only now are we recovering from the very material worsening that did arrive.

The employment numbers are seasonally adjusted, of course, and winter seasonal adjustments can be misleading. If the February gain were standing alone, there would be reason to doubt the figure. But this is no one-month wonder. Over the last six months, construction employment is up 154,000. We haven’t seen that large an increase since 2006.

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The Texas Tribune: New Codes Aim to Cut Energy Use

The opportunity for savings — and to draw down
dollars — has spurred action. In January, Texas will adopt a building code that should cut the energy consumption of new single-family homes by more than 15 percent, according to the Energy Systems Laboratory at the Texas AM University System. The state tightened codes for commercial and industrial buildings and other residential buildings in April.

Big Texas cities tend to jump out ahead of the statewide building codes, which have often lagged nationally. This month, the Houston City Council passed a measure requiring new homes to be about 5 percent more efficient than the forthcoming statewide code, an effort to cut down on homes’ energy use and burnish Houston’s green credentials. Over the next few years, Houston will consider more requirements that could put the city some 15 percent above the state code in terms of energy savings.

Environmentalists welcome the stronger codes, but builders have concerns. Scott Norman, executive director of the Texas Association of Builders, said his group supports Houston’s recent action. But he said further efficiency increases the need to balance energy savings with economic considerations.

Energy-saving requirements can add a few thousand dollars to the upfront cost of a new home, Mr. Norman said, and that can price people out of the market, especially in a down economy.

Luke Metzger, director of Environment Texas, said the code changes are crucial to saving energy in both new and existing structures. “Homes we build today are going to last another 70 years,” he said.

But crafting codes is easier than making them effective. A report this year by the nonprofit Building Codes Assistance Project with input from Texas’ State Energy Conservation Office noted that “many local governments will see the mandatory statewide code as an unfunded mandate set by the state.” Enforcement capabilities are often lacking, the report said.

Even big cities struggle. In Austin, where codes have already gone beyond the forthcoming statewide requirements, the number of annual building inspections fell from 226,000 three years ago to about 165,000 today — a casualty of budget tightening, according to Dan McNabb, the city’s building inspections division manager. Austin’s inspectors do not just address energy issues; they also spend time looking at safety matters like stairs and glass.

“Every project is different,” Mr. McNabb said.

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Hydraulic Fracturing Brings Money, and Problems, to Pennsylvania

Fortunately for him, the gas companies arrived at about the same time, and Mr. Diaz saw an opportunity.

He started hauling their waste. He parlayed 1 truck into 8 and now has a fleet of 53. Then he revived a weedy rail spur and now leases 210 rail cars to haul more waste containers. His work force grew to 180 from 30 as he created a business that now has revenues of $45 million a year.

Other residents also began taking advantage of the “gas rush.” Some supplied the companies with machine parts; others laid pipe. One entrepreneurial couple opened a food wagon where they also sell alpaca socks to drillers from Louisiana and Texas who were unprepared for the cold.

The gas boom is transforming small towns like this one (population 4,400 and growing) and revitalizing the economy of this once-forgotten stretch of rural northeastern Pennsylvania. The few hotels here have expanded, restaurants are packed and housing rentals have more than doubled.

“There’s been a snowball effect due to the gas companies coming in,” Mr. Diaz, 33, said recently at his bustling empire near here.

But the boom — brought on by an advanced drilling technique called hydraulic fracturing, known as fracking — has brought problems too. While the gas companies have created numerous high-paying drilling jobs, many residents lack the skills for them. Some people’s drinking water has been contaminated. Narrow country roads are crumbling under the weight of heavy trucks. With housing scarce and expensive, more residents are becoming homeless. Local services and infrastructure are strained.

“Very little tax revenue goes to local governments to help them share in the benefits of the economic development,” said Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, an independent policy research organization.

And some are asking whether short-term gains have obscured the long-term view of an industry marked by boom-bust cycles.

“What happens in the long run is the critical question,” said Kathy Braiser, associate professor of rural sociology at Penn State. “How can communities take advantage of the benefits and try to mitigate the negative issues so that they are well-positioned for when this does tail off?”

The boom has been driven by extensive gas reserves in the Marcellus Shale, the vast rock formation under several Middle Atlantic states and concentrated in Pennsylvania. Industry-backed research says that a typical Marcellus well can generate millions of dollars in economic benefits, including wages, taxes and stimulation through the supply chain. (Critics say the amount is exaggerated.)

In Pennsylvania, more than 3,000 wells have been drilled in the past three years and permits for thousands more have been issued. Here in Susquehanna County, a poor rural county of which Montrose is the seat, 262 wells had been drilled by a half-dozen different gas companies as of the end of July; permits have been issued for 400 more.

At this time of year, the roller-coaster hills are blanketed in the oranges of fall. Dotted among them are industrial well sites, typically three to five acres, where drills crank and groan around the clock, glowing at night like spaceship colonies.

For Mr. Diaz and a charmed circle of local winners — water haulers and motel operators, pipeline workers and waitresses, lawyers, surveyors and launderers — the drilling has fueled an economic turnabout.

John and Phyllis DiGiori, who own an alpaca farm, started a food concession truck along the main road. Along with burgers and fries, they now offer warm clothing to workers from Texas and Louisiana. “Ask us about our alpaca socks and more,” says a handwritten sign taped to the service window.

Dan and Gretchen Backer, who oversee 40 rooms in hotels and apartments, including the Inn at Montrose, responded to the boom by renovating their rooms and adding amenities like flat-screen TVs. Now, Ms. Backer said, they have doubled their rates, to $2,500 a month, for a two-bedroom rental.

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Complaints Lead to Ban on Pop-Up Car Markets

But like so many other pop-up markets in Southern California, the dealerships are unlicensed, unregulated and, according to public officials, illegal.

Now, local governments are trying to curb the unlicensed dealers by making it illegal to park any car with a “For Sale” sign in the areas where these markets proliferate. The City of Los Angeles has already enacted a ban on two major streets, and the county is set to add Pacific Boulevard and many more roads to that list after a final vote Tuesday.

“This attempt to use the street as a place of business creates a hazard for businesses and residents who pay taxes to maintain those streets,” a Los Angeles County supervisor, Gloria Molina, said. “We are trying to correct a public nuisance.”

These used car markets have appeared all over Los Angeles County in the past 15 years, especially in the largely Latino communities southeast of Los Angeles like Walnut Park, where they conduct business entirely in Spanish.

Pacific Boulevard, in particular, has developed a reputation as a place to get a bargain on used vehicles, and people come from all over East Los Angeles. Fernando Perez, a local landscaper, took his son with him on Saturday to look for a used truck.

“A dealer is probably a better place to go, but with the economy like it is, I come here,” Mr. Perez, 37, said. He had his eye on a blue Ford Explorer chalked for $5,500. “At a dealer, this car would cost double,” he said.

Local residents and business owners, however, complain that car dealers clog traffic and hog parking spaces, which are hard enough to come by with five million cars on the road in Los Angeles County.

“They park in front of the businesses and just leave the cars there all weekend, so the customers trying to come in and shop in the area have nowhere to park,” said Eddie Carvajal, owner of MM Furniture on Pacific Boulevard. “Even when they take a car for a test drive, they pull another vehicle into the space so they don’t lose it.”

Though it is illegal to operate a car sale business without a license in California, county officials call the law almost impossible to enforce.

The dealers hang around in a nearby park, playing cards or lying on park benches, waiting for customers to call. County officials say they bring the cars in from mechanic shops and nearby dealerships, in hopes of moving vehicles that have not sold. Many of the cars have the same phone numbers listed on them. Mr. Carvajal said sellers sometimes dropped cars off on tow trucks, two or three at a time.

When the dealers saw a photographer snapping pictures of the chalked windows, they quickly wiped the prices off all the windshields. They all denied they were selling cars — one man polishing a car ran away when a reporter approached him, and five others in the park said they were waiting around for a party that would start later. One pointed to a man sleeping on a bench and said, “It’s his birthday.”

The used car markets are only the biggest and most visible of the many unlicensed industries that flourish here. On Saturday morning, men rode up and down Pacific Boulevard on bicycles, selling watermelon, papaya and cucumber out of plastic containers. At night, the street becomes a hub of prostitution, local business owners said.

Local governments have tried to combat these weekend car dealerships for more than a decade. Los Angeles briefly banned parking with a “For Sale” sign anywhere in the city. But in 2006, the ordinance was struck down in court on First Amendment grounds, and since then underground car markets in Southern California have continued to grow.

County and Los Angeles city officials say the new laws, which single out only certain streets, are narrow enough to stand up to a legal challenge this time.

But not all of the people selling cars here are underground dealers. Gelacio Chacon, 20, took his car to Walnut Park because he knew people came to Pacific Boulevard to buy cars. He put a “For Sale” sign up in the window and sat nearby, waiting for someone to call.

The new law, which would prevent anyone from parking on the street with a “For Sale” sign, would affect people like Mr. Chacon trying to sell their own cars, as well as the underground dealers. On the first offense, a car with a “For Sale” sign would be ticketed; the second time, it would be impounded.

Peter Eliasberg, legal director for the American Civil Liberties Union of Southern California, which brought the lawsuit against the citywide ban in Los Angeles, remained skeptical about the new laws.

“There are huge problems with these ordinances,” Mr. Eliasberg said. “There are other ways you can target the problem if people are really using these streets as outdoor malls for cars. Someone who lives in the neighborhood should be able to park there with a sign up.”

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Green Column: Electric Cars Remain Tough Sell in China

The pilot project, which could be replicated in other cities, underpins China’s ambitious plans to put at least half a million electric vehicles and plug-in hybrids on the road by 2015.

The country is the world’s biggest emitter of greenhouse gases — which scientists say are causing global warming — from the burning of fossil fuels and other human activities. With the largest and fastest-growing auto market in the world, China’s carbon footprint can only grow.

To bolster China’s energy security, Beijing has pronounced electric vehicles a top priority. It has earmarked $1.5 billion annually for the industry for the next 10 years in the hope that it can transform the country into one of the leading producers of clean vehicles.

But even with government support and the enthusiasm of electric-taxi customers, challenges remain if electric vehicles are to gain broader acceptance and widespread use.

Charging stations are few and far between, repair shops are hard to find and the cars are costly. Even after generous government support, a Shenzhen electric taxi costs 80 percent more than the Volkswagen Santana that ordinarily cruises the streets of Shenzhen.

“The electric car is still too expensive, and we ended up paying a lot more than for a Santana, even with government subsidies,” said Du Jun, general manager of Pengcheng E-taxi, the operator participating in the pilot project.

Local automakers like SAIC Motor and Dongfeng Motor Group have pledged large investments in greener vehicles. Global automakers, including BMW and Nissan Motor, are also working with local governments to roll out such vehicles — in these two cases the Mini E and the Leaf, respectively.

China’s investment in the electric-vehicle industry has no comparable counterpart in the United States, although the U.S. Congress is considering a bill that would allocate $2.9 billion for a program to help develop the infrastructure for widespread use of electric cars.

Germany’s cabinet agreed on plans in May to encourage the country’s electric auto sector with billions of euros in subsidies, aiming to have one million of the cars on the road by 2020. The subsidies will double state support for research and development to €2 billion, or $2.9 billion, through 2013.

For China, however, hitting its electric-vehicle targets will mean quickly winning market acceptance for an untested technology.

“I think it’s going to be a very, very long time, because the Chinese consumer, at the end of the day, is very pragmatic and wants a reliable car with a gasoline engine,” said Michael Dunne, president of the industry consulting firm Dunne Co. in Hong Kong. “They don’t want to be the ones experimenting.”

But he said that government fleets and bus companies were more likely to buy electric vehicles.

The Chinese government picked Shenzhen, along with 12 other cities, in 2009 to lead the migration to green vehicles. Shenzhen and Hangzhou are the only ones attempting to establish e-taxi fleets.

The state-controlled Pengcheng E-Taxi, partly owned by BYD, a major domestic manufacturer of green vehicles that is backed by Warren E. Buffett, was incorporated in March 2010. Fifty e6 cabs made by BYD hit the roads in the city three months later.

“People are really interested in the car,” said Zeng Xiweng, one of the top drivers in the company. “Over 90 percent of customers start asking questions, once they get in.”

“And it’s not just me,” he added. “All my colleagues have similar experiences as well.”

Daniel Li, a Shenzhen resident, recently took a ride in an electric taxi, one of the red cars with a wavy white band around the body that have been operating in the city for more than a year.

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Stocks Gain on Jobs Report

The dollar surged against major currencies on signs the troubled United States labor market is recovering.

In the report, the Labor Department said the unemployment rate fell to 8.8 percent, the lowest since March 2009, as companies added workers at the fastest two-month pace since before the recession began. Approximately 216,000 new jobs were added to the economy last month, offsetting layoffs in local governments. Economists had expected the unemployment rate to remain at 8.9 percent.

Shortly after the opening bell, the Dow Jones industrial rose 75.27 points, or 0.6 percent. The Standard Poor’s 500-stock index gained 9.44 points, or 0.7 percent. The Nasdaq composite index rose 13.06 points, or 0.5 percent.

Oil prices rose after the report on the unemployment rate. Gasoline prices may rise as more workers join the daily commute. Benchmark crude for May delivery added 21 cents to $106.94 per barrel on the New York Mercantile Exchange.

Retail gasoline also jumped overnight, to an average of $3.62 per gallon. Gasoline prices are at the highest levels ever for this time of year.

This is a day heavy with economic data. Later this morning, the Institute of Supply Management will issue its manufacturing index for March. Economists anticipate that the index fell slightly from February, when it hit its highest level since May 2004. The manufacturing sector of the economy has expanded for the past 19 months. Separately, the Commerce Department will issue a report on the construction of new homes in February.

Auto companies will release March sales figures throughout the day. Nasdaq OMX Group and IntercontinentalExchange said early Friday that they were making a bid for NYSE Euronext, offering what they say is a 19 percent premium to the deal the company struck with the operator of the German stock exchange.

The Dow Jones industrial average finished Thursday with its best first-quarter performance since 1999, rising 6.4 percent in the first three months of the year.

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